Auditor General Report-Level-Crossings

Managing the Level Crossing Removal Program
Victorian Auditor -General’s Office

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Managing the
Level Crossing
Removal Program
December 2017
December 2017
2017–18:10
Victorian Auditor-General’s Report

2017–18:10
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Managing the
Level Crossing
Removal Program

Ordered to be published
VICTORIAN GOVERNMENT PRINTER
December 2017
PP No 358, Session 2014–17

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The Hon Bruce Atkinson MLC The Hon Colin Brooks MP
President Speaker
Legislative Council Legislative Assembly
Parliament House Parliament House
Melbourne Melbourne

Dear Presiding Officers

Under the provisions of section 16AB of the Audit Act 1994, I transmit my report
Managing the Level Crossing Removal Program.

Yours faithfully

Andrew Greaves
Auditor-General
14 December 2017

Contents
Audit overview ............................................................................................................. 7
Conclusion .................................................................................................................................. 7
Findings ...................................................................................................................................... 8
Recommendations ................................................................................................................... 15
Responses to recommendations .............................................................................................. 16
1 Audit context ......................................................................................................... 17
Background ..................................................................................................................... 17
Options for level crossing removals ................................................................................ 19
Level Crossing Removal Program .................................................................................... 20
Status of the Level Crossing Removal Program ............................................................... 23
Integration with other transport projects ....................................................................... 24
Governance framework ................................................................................................... 24
Agency roles .................................................................................................................... 27
Relevant legislation ......................................................................................................... 29
Why this audit is important ............................................................................................. 29
What this audit examined and how ................................................................................ 29
Report structure .............................................................................................................. 30
2 Level crossing selection and cost ........................................................................... 31
Conclusion ....................................................................................................................... 31
Site prioritisation and selection ...................................................................................... 31
Options assessment ........................................................................................................ 35
Program cost ................................................................................................................... 41
Strategic planning for future prioritisation ..................................................................... 45
3 Procurement and delivery ..................................................................................... 47
Conclusion ....................................................................................................................... 47
Delivery models ............................................................................................................... 47
Contract structure ........................................................................................................... 50
Management of procurement risks ................................................................................. 51
Packaging and sequencing of works ................................................................................ 54
Rail occupations .............................................................................................................. 59
4 Intended benefits .................................................................................................. 61
Conclusion ....................................................................................................................... 61
Benefits management framework ................................................................................... 61
Maximising value-capture opportunities ........................................................................ 64
5 Network integration and integrity ......................................................................... 67
Conclusion ....................................................................................................................... 67
Oversight of public transport network integrity.............................................................. 67
Cost implications of poor network integrity .................................................................... 71
Victorian Auditor-General’s Report Managing the Level Crossing Removal Program 5

Appendix A. Audit Act 1994 section 16—submissions and comments ..................... 75
Appendix B. List of crossings for removal .................................................................. 85
Appendix C. ALCAM 2008 metropolitan crossings list ............................................... 87
Appendix D. VicRoads 2013 priority list ..................................................................... 89
Appendix E. Core quantifiable benefits...................................................................... 93
Appendix F. Contract models ..................................................................................... 95
Appendix G. Benefits framework ............................................................................... 97

Acronyms
ALCAM Australian Level Crossing Assessment Model
ARO Accredited rail operators
BCR Benefit–cost ratio
CBA Cost–benefit analysis
CPLU Cranbourne Pakenham Line Upgrade
CTD Caulfield to Dandenong
DEDJTR Department of Economic Development, Jobs, Transport and Resources
DPC Department of Premier and Cabinet
DTF Department of Treasury and Finance
HCMT High Capacity Metropolitan Train
HVHR High Value High Risk
IDO Integrated development opportunity
KPI Key performance indicator
LXRA Level Crossing Removal Authority
LXRP Level Crossing Removal Program
MTIP Major Transport Infrastructure Program
MTM Metro Trains Melbourne
MTP Metro Tunnel Project
NACG National Alliance Contracting Guidelines
NOP Non-owner participants
PTV Public Transport Victoria
TfV Transport for Victoria
VAGO Victorian Auditor-General’s Office

6 Managing the Level Crossing Removal Program Victorian Auditor-General’s Report

Audit overview
Melbourne is facing unprecedented population growth in the coming decades,
which will result in an increase in travel demands. Plan Melbourne 2014 stated
that, by 2050, Melbourne’s road and rail network will need to accommodate an
additional 10.7 million daily trips, on top of the 14.2 million daily trips recorded
in 2014.
The Level Crossing Removal Program (LXRP) is one of the Victorian
Government’s key transport infrastructure projects. Part of an overarching
policy to improve Melbourne’s transport network, its stated aim is to remove
50 of the most dangerous and congested level crossings.
Following its election in 2014, the government upheld its pre-election
commitment to remove 50 crossings by 2022. The May 2015 Budget included an
additional commitment to remove 20 crossings by 2018. Since the LXRP’s
announcement, the government has identified an additional two level crossings
for removal, bringing the total to 52.
Established in 2015, the Level Crossing Removal Authority (LXRA) took over
responsibility for managing the program from VicRoads. At September 2017:
 10 level crossings had been removed
 16 were in design and construction stages
 11 had a contract awarded
 nine were in the tender stage
 six were in early planning stages.
As the LXRP is only two years into an eight-year program, our assessment at this
time serves to identify risks, lessons and opportunities for improvement for
future works.
We have examined whether the LXRP is cost-effective in terms of whether it has
improved, or is expected to improve, the safety and efficiency of the state’s road
and rail network.
Our audit focused on the role of the Department of Economic Development,
Jobs, Transport and Resources (DEDJTR), LXRA, Public Transport Victoria (PTV),
and Transport for Victoria (TfV) in providing oversight and strategic focus for
the LXRP.
Contrary to publicly stated objectives, not all of the 50 level crossings selected
Conclusion for removal are the most dangerous and congested. In this sense, the LXRP is
not fully effective when compared to the stated objective.
The delivery of the program is ahead of schedule, and LXRA expects to surpass
its target of removing 20 crossings by 2018. However, this pace presents risks to
achieving value for money. These risks are compounded by an inadequate and
delayed business case, and poor indicators to measure program benefits.

While LXRA is managing some aspects of the program well, including rail
occupations and monitoring integrated development opportunities (IDO),
opportunities remain to improve the LXRP—in particular, the rigour applied
to and transparency of site selection and prioritisation, site packaging and
procurement, benefits management, and integration of various rail projects.
Addressing these concerns will provide greater assurance that the program will
both improve the safety and efficiency of the state’s road and rail network, and
maximise value for money.
Gaps in rail network integrity have had significant consequences for the
Network integrity refers
to a functionally effective, integration of the LXRP and other concurrent rail projects, including the Metro
reliable, maintainable, Tunnel Project (MTP) and the Cranbourne Pakenham Line Upgrade (CPLU).
secure, safe and
environmentally Now that TfV is responsible for setting the state’s strategic transport direction,
compatible public it needs to address the gaps in rail network planning and requirements, so that
transport network. future network requirements appropriately inform planning for major rail
transport projects. TfV’s development of transport planning frameworks has
the potential to improve rail network planning.
Program business case
Findings
The LXRP business case was finalised in April 2017, almost two years after the
program had commenced.
Weaknesses in the business case undermine its purpose and its value as a basis
for the government’s decision to commit to the investment. This situation needs
to be remedied in future advice to government about investment decisions for
crossing removals, if these decisions are to be based on a sound understanding
of the costs, benefits and options of the investment.
Site selection and prioritisation
The LXRP business case is not consistent with the stated objective of the LXRP—
to remove 50 of the most dangerous and congested level crossings—in that it
omits the word ‘most’.
This important difference arises in part because DEDJTR did not assess the
merits of the 50 level crossing sites identified for removal, which were part of
an election commitment in 2014.
As a result, the April 2017 approved business case does not include any analysis
or rationale for why the 50 level crossings were selected as higher priority—or
demonstrate that they were more dangerous and congested—than other level
crossings across Melbourne. The 50 selected level crossing sites include a
number of sites that have not been identified as dangerous and congested.
This means that the business case was necessarily limited in its function to fully
inform the incoming government about available options and whether the
selected sites provided the best approach for it to achieve its desired policy
objectives.

Options assessment for grade separation
LXRA and VicRoads completed their options assessments for grade
separations—separating the level of rail and road—of 20 crossings before the
business case was completed.
LXRA’s options assessments for the remaining 30 crossings—developed as part
of the business case—differed in approach and in the level of detail to the first
20. The options assessment framework for these 30 crossing sites included a
multi-criteria analysis tool to guide the selection of grade separation types.
This framework aims to ensure that the chosen options are cost-effective and
defensible, and the process is comprehensive, transparent and consistent.
The options assessment framework does not weight criteria to indicate the
relative importance of each criterion. While this allows for flexible
decision-making, it also means options assessments can be inconsistent and
that the selection of the preferred option lacks transparency.
LXRA refers all preferred grade separation options, including supporting options
analysis, to the Minister for Public Transport (the Minister) for approval.
The Minister has discretion to approve the option or, where it is likely to be
contentious with key stakeholders, refer it to government for endorsement.
LXRA’s identification of contentious sites is subjective, with no clearly
documented rationale, and offers limited transparency around how decisions
were made.
In advising government on options for the Frankston line sites, LXRA used
different assessment criteria than it used for the other sites. LXRA advised that
it did this to accommodate additional information gathered about the sites
through more detailed analysis and community consultation. However, the
existing option assessment framework is designed to incorporate additional
information as site investigation proceeds.
There are important differences between the two sets of criteria. In particular,
the criteria used for the Southern package of crossing removals focus on aspects
like impact on adjacent properties whereas the original criteria focus on project
alignment and outcomes. While the modified criteria produced similar results to
the original assessments in this instance, the decision to use different criteria
indicates that LXRA is not consistently or transparently applying the options
assessment framework.
Program cost
The cumulative cost of the program has increased by more than 38 per cent—
based on the initial estimate of $5–6 billion in 2015—to $8.3 billion at July 2017.
DEDJTR did not follow the High Value High Risk (HVHR) guidelines to update the
business case to reflect ongoing changes to program cost estimates arising from
scope changes, including the addition of two more sites. The identification of
future network requirements also did not result in updates to the program costs
in the business case. The change in cost, with no assumed benefit increase,
would result in a reduced benefit–cost ratio (BCR).

The business case was set up on the assumption of like-for-like replacement of
existing infrastructure, but this was not realistic. For example, as the program
progresses, works at level crossing removal sites along the Frankston and
Cranbourne/Pakenham lines—such as required traction power upgrades and
High Capacity Metropolitan Train (HCMT) requirements—are being identified.
These requirements were known at the time of the business case development.
The business case provides for future proofing works—for example increasing
station platform length, extending the width of the rail corridor, or building
wider road bridges—for 16 crossings. LXRA has made provision of $148 million
for this work, which is less than 2 per cent of the $7.6 billion identified in the
business case.
Procurement and delivery
The 52 level crossing removal sites are divided into packages for delivery—
eight packages contain between two and nine level crossings and two packages
have one crossing each. There are six crossings that LXRA has not yet allocated
to a package.
The LXRP is being delivered using a mix of contract types:
 Competitive alliance contracts—two or more shortlisted parties develop
competing project costs (26 sites).
 Partial price competitive alliance contracts—shortlisted parties develop
pricing for some elements of the total project cost. The sole successful party
then prices the remaining elements alongside the owner of the project
(24 sites).
 Design and construct contracts—the client develops a limited design and
invites potential suppliers to tender on the basis of completing and
constructing the design. This contract typically allocates construction and
design risk to the suppliers (two sites).
Partial price competition
While LXRA and VicRoads procured the initial 20 sites through competitive price
competition, LXRA will only apply full price competition to a quarter of the
remaining 32 sites, procuring the rest through partial price competition. In one
instance, for the North Eastern package, LXRA procured the proponent for all
four level crossings in the package using partial price competition. The main
consideration for this decision was to fast track procurement so that LXRA could
meet the government’s committed time frame for the LXRP and the duplication
of the Hurstbridge line.
While partial price competition can streamline the tendering process—as LXRA
does not need to compare two fully priced proposals—it also removes an
element of competitive tension. Victorian policy permits the use of partial price
competition in some circumstances—for example where the community needs
works to commence immediately. However, LXRA’s rationale for selecting this
method for its North Eastern Package—to fast-track the package to meet a
government commitment—is not in itself a sufficient justification.

Contract structure
Under its contract structure for the North Eastern, North Western, Western
and Southern packages, parties bid competitively for the initial sites. If LXRA is
satisfied with the alliance’s performance on those sites, it asks the alliance to
develop a formal proposal for the additional sites in the package. This means
the additional sites will not be subject to full price competition.
LXRA advises that there are benefits to this structure. For example, according to
LXRA, the structure allows for stable engagement with the private sector and
locks in key resources prior to significant construction activity across Australia in
2019–22. However there are some inherent risks in the procurement process,
primarily due to reduced price and design competition. These risks are
compounded in the North Eastern package, where LXRA did not use full price
competition to procure a proponent for the initial sites.
Managing procurement risks
To manage its procurement risks, LXRA is using benchmarking and the
commercial frameworks of its alliance agreements.
LXRA’s benchmarking framework includes a tool for comparing price and
productivity efficiencies across the LXRP alliances. The tool allows LXRA to
monitor whether it is achieving value for money in delivery of the program.
To date, LXRA has only applied the benchmarking tool to the North Eastern
package.
When awarding initial works packages, LXRA locks in overhead and profit for all
remaining sites in that package. This introduces an element of competition into
awarding the remaining sites. However, there is a risk that parties can bid low
on overheads and profit with the expectation of increased direct job costs on
later sites. To date, overhead and profit as a percentage of direct job costs has
been lower for packages using the deferred pricing model than for the initial
four alliances that did not use this model. This reinforces the need for LXRA to
continue to develop its benchmarking tool to assess proposals effectively and
identify potential under- or overpricing. It is important that LXRA continues to
improve its framework and embed it into future procurements.
LXRA is also using a risk and reward regime for each alliance, which compares
actual and target performance in both cost and non-cost areas. The non-cost
elements of LXRA’s risk and reward regimes are in line with national guidance
and include clear methods for calculating performance. However, LXRA has
capped the amount that its contractors pay in the event of a cost overrun. This
means there is a risk that if the cost overrun for a package exceeds the cap, the
state will effectively bear all additional project risk.


Packaging and sequencing
The LXRP business case considered two options for packaging the remaining
30 level crossing removals:
 a corridor approach—in which crossing sites along rail corridors are
packaged together
 a discipline-based approach—where similar work types are packaged
together (such as stations, power, signalling and rail track).
LXRA’s evaluation of these two options emphasised that time, management
of disruptions, and risk management were important considerations. LXRA
ultimately determined that the corridor approach better matched the LXRP’s
cost and timeliness procurement objectives.
LXRA did not analyse which of the crossings had the highest priority for removal
from a safety or rail efficiency perspective, to inform the sequencing of crossing
removals. Of the 50 level crossings, LXRA has prioritised those that had greater
preparatory work completed and that had a less complex design solution. This
has brought forward some crossing removals, and LXRA expects to exceed the
government target of 20 crossing removals by 2018.
The remaining crossings are more complex and more challenging to complete
within the allocated time frame and budget. However, it is too early to tell the
impact of the current packaging and sequencing regime on the overall program.
LXRA is using 10 packages across the whole program. However, it did not
package the following crossings using the corridor approach:
 Abbotts Road, Dandenong South—part of the Western package instead of
the Caulfield to Dandenong (CTD) package
 Skye Road, Frankston—part of the North Western package instead of
Southern package.
The level crossing at Skye Road was initially part of the Southern package.
However, following a decision to accelerate the removal of this level crossing,
LXRA moved Skye Road into the North Western package.
LXRA estimated that this cost an additional $11 million, due to a reduction in
planned program efficiencies. While $11 million is not material in the context
of the whole LXRP program, accelerating its removal by moving responsibility
to the North Western Alliance helps LXRA to meet the government’s committed
target of removing 20 level crossing by 2018.
Rail occupation management
Removing level crossings involves the temporary closure of the rail line and its
occupation to enable construction works. LXRA and alliance members have
processes in place to manage rail occupations appropriately and have managed
them well. However, more than half of the planned occupations are yet to
occur.

Planning for major occupations commences at least six months before the
proposed occupation because contractors usually work 24 hours a day,
seven days a week during the occupation.
As at July 2017, only three of the 48 completed major occupations were late.
Two of these delays were less than one hour, and the third was one day late.
This is a good result and evidence of sound occupation planning and project
management during the occupations.
Intended benefits
As completion of the LXRP is not due until 2022, there is insufficient data at
present to make an informed judgement on how well the program is achieving
intended outcomes.
DEDJTR has developed a benefits management framework in accordance
with Department of Treasury and Finance (DTF) requirements. This includes
development of an investment logic map, benefit map and benefit management
plan. However, current monitoring and reporting of outcomes is not meaningful
due to the lack of comprehensive key performance indicators (KPI) and targets.
Key performance indicators and targets
KPI targets specified in the benefit management plan only require performance
improvement without defining what constitutes the improvement. Examples
of such targets are, ‘100 per cent of sites with road based public transport will
have improved punctuality’ or ‘100 per cent of sites will improve access to jobs,
education, and services’. LXRA advised that this is deliberate because factors
other than the crossing removal can affect outcomes. Given this, the KPIs
themselves are unlikely to be suitable measures.
At March 2017, LXRA had prepared four individual draft benefit reports for the
removed level crossings. These reports do not provide meaningful information
about the extent of improvement and whether the progress results are in line
with expectations.
Value capture
LXRA has developed a comprehensive plan aimed at maximising value capture
opportunities through the LXRP. For the LXRP, value capture is limited to IDOs—
surplus railway land from a grade separation that can be sold to the private
sector to develop. IDOs can include broader social benefits, such as social
housing, community services and open spaces.
LXRA developed an IDO strategy in December 2015, providing guidance on
identifying IDOs and their potential benefits and how these benefits can be
realised.
LXRA’s ongoing monitoring of identified IDO projects is timely and
comprehensive. Monthly IDO dashboard reports provide a comprehensive
summary of the status of each level crossing site against project milestones.

Network integrity
One of PTV’s key functions, since September 2016, is to ensure the integrity of
the public transport network, to make sure it is functionally effective, reliable,
maintainable, secure, safe and environmentally compatible. As part of this role,
PTV is responsible for establishing:
 network technical requirements—high-level technical requirements for a
transport corridor or geographic area
 network technical standards—derived from network technical requirements
to inform and direct the development of system requirements and
specifications, and accredited rail operators (ARO) engineering standards.
PTV does not have adequate resources to be effective in its network integrity
role. This has had undesirable cost and scope consequences for the integration
of the LXRP and other concurrent rail projects into the rail network. PTV, with
support from TfV—which is now responsible for strategic future transport
planning—will need to ensure that actions to address this shortcoming are
effective.
Application of standards to the LXRP
LXRA sets project system requirements that contractors delivering the LXRP
must comply with. These requirements translate PTV and Metro Trains
Melbourne (MTM) requirements, as well as other standards and specifications.
However, during the translation process, there is scope for variations which can,
in turn, have cost implications for projects. For example, approval to not comply
or partially comply may reduce project costs and time lines. MTM manages the
approval processes for changes to MTM engineering standards and their
interpretation using a standard waiver or design practice note.
However, as MTM has limited insight into network-level requirements and
planned developments, there is a risk that these decisions can impact other or
future transport projects. Furthermore, as MTM is also a member of all of the
LXRP alliances, a perceived conflict of interest exists—MTM is both part of the
project development team applying for a standard waiver and part of the
organisation making decisions on variation requests.
Controls for network integrity risks
PTV has established a number of arrangements to improve oversight of and
accountability over its network integrity function. These include a network
integrity governance framework and a formalised standards governance process
in the new agreement with MTM, beginning 30 November 2017.
PTV’s additional controls to improve its network integrity function are
happening in parallel with the delivery of a number of important transport
projects. It is important for PTV and TfV to closely monitor the effectiveness of
these new arrangements, particularly for programs such as the LXRP which is
well underway.

We recommend that the Department of Economic Development, Jobs,
Recommendations Transport and Resources:
1. follow High Value High Risk guidelines in developing a business case as the
basis for government’s investment decisions, including timing of approval,
presenting a range of project options and updating the business case with
any significant changes (see Section 2.2)
2. in conjunction with the Level Crossing Removal Authority, develop a
transparent selection and prioritisation process for targeted removal of
level crossings beyond current commitments made by government
(see Sections 2.2 and 2.5)
3. develop comprehensive key performance indicators and targets to
meaningfully measure achievement of intended benefits (see Section 4.2)
4. in conjunction with the Level Crossing Removal Authority, progressively
monitor the progress of achievement of Level Crossing Removal Program
outcomes to facilitate timely insight into how the program is progressing
towards benefits realisation (see Section 4.2)
5. in conjunction with Public Transport Victoria, develop contemporary
network rail standards, so that agencies delivering rail projects have an
understanding of network requirements and what is required to assure
projects meet engineering, network integration and safety requirements
(see Section 5.2)
6. in conjunction with Public Transport Victoria, monitor the effectiveness of
Public Transport Victoria’s controls to improve its network integrity function
(see Section 5.2).
We recommend that the Level Crossing Removal Authority:
7. apply options assessments transparently and consistently (see Section 2.3)
8. commission an independent evaluation and report on whether the deferred
pricing contract structure is cost-effective and has delivered its intended
benefits (see Section 3.3)
9. embed its benchmarking tool into the procurement process before using it
to award additional works sites (see Section 3.4)
10. in conjunction with Transport for Victoria, evaluate its packaging approach
and incorporate lessons learned into future level crossing removals (see
Section 3.5).


We have consulted with DEDJTR, PTV, VicRoads and VicTrack, and we considered
Responses to their views when reaching our audit conclusions. As required by section 16(3) of
recommendations the Audit Act 1994, we gave a draft copy of this report to those agencies and
asked for their submissions or comments. We also provided a copy of the report
to the Department of Premier and Cabinet (DPC).
The following is a summary of those responses. The full responses are included
in Appendix A.
DEDJTR accepted the recommendations, noting its intention to improve the
delivery of the balance of the LXRP, and provided an action plan to address
them.
PTV accepted the recommendations and provided an action plan on how it will
implement them.
Although there were no recommendations directed toward VicRoads and
VicTrack, both agencies provided a response. VicTrack advised it will continue its
collaboration with LXRA and other agencies as required.


Audit context
Melbourne has an extensive transport network, which includes rail, roads,
Background cycle paths and footpaths. The challenge is to ensure these components work
together as an integrated transport system so that people and goods can move
efficiently in and around Melbourne.
Melbourne is facing unprecedented population growth. In the next 30 years,
Victoria’s population is expected to increase by up to 60 per cent to 9.5 million.
As the population grows, travel demands also increase, with public transport
use growing at a faster rate than the population. Plan Melbourne 2014 indicates
that, by 2050, Melbourne’s road and rail network will need to accommodate an
additional 10.7 million daily trips, on top of the 14.2 million daily trips recorded
in 2014.
Managing increasing demand on road and rail infrastructure is a key task for
government, and central to maintaining Melbourne’s liveability.
Level crossing removals in Melbourne
A level crossing—also known as a grade crossing—is an intersection where a
railway line crosses a road or path at the same level, as opposed to crossing
over or under using a bridge or tunnel.
Separating the level of the road and rail is a grade separation. Grade separations
can enhance road and rail network performance through the removal of the
conflict at a crossing, improved station design, improved station access, and the
integration of stations into the surrounding area.


Reasons for removing level crossings
Governments remove level crossings for a range of reasons, including to
facilitate an increase in the frequency of train services, to extend rail lines
through developed areas or to improve safety and traffic flow. In the past,
some of these removals were part of a larger project—for example, the grade
separations in the extension of the Hurstbridge-South Morang lines—however,
most were done on an ad hoc basis.
Between 2005 and 2015, there were more than 149 collisions between a
The rail corridor is the
land on which the railway train and a vehicle or pedestrian along a rail corridor across metropolitan
is built. It comprises all Melbourne—including the 178 level crossings on the electrified rail network.
property typically Of these, 38 resulted in fatalities and 22 in serious injuries. Boom gate closure
bounded from fence line times and traffic volumes across sites vary significantly and, in some locations,
to fence line or, if not
fenced, everywhere
extended boom gate closures can contribute to road traffic congestion.
15 metres either side of
the outermost parts of
Large number of crossings in metropolitan Melbourne
the track, unless
otherwise indicated. The number of road level crossings remaining on Melbourne’s metropolitan
electrified train network is high compared to other Australian cities—see
Figure 1A.

National comparison of metropolitan rail level crossings
Number of level crossings
City at September 2017
Adelaide 84
Brisbane 47
Melbourne 178(a)
Perth 29
Sydney 3
(a) Figure for Melbourne is prior to the LXRP.
Canberra, Darwin and Hobart do not have metropolitan train services.
VAGO.
A level crossing removal program managed by VicRoads, Metro Level Crossing

Blitz, commenced under the previous government in 2011, with business cases
finalised in 2013 and 2014.
The current government announced a level crossing removal program while
still in opposition. This program formed part of its Project 10 000 election
commitment which identified 40 level crossings for removal. Ten further
crossings were added before the election.
These crossings formed part of the 2015–22 LXRP. In 2015, LXRA was
established and took over responsibility for managing the program from
VicRoads.

There are four main types of road-rail grade separations—see Figure 1B.
Options for
level crossing
removals Main types of road-rail grade separations
Rail over road—the road remains at its
existing level and a rail bridge is built
over it. Modifications to train stations
may be required, at least to the platform
levels, to suit the new rail level.
Elevating the rail line provides
opportunities for increased connectivity
across the rail corridor.
Rail under road—the rail line is
lowered to go beneath the existing
road. A bridge is built to maintain the
road at its existing level. Where there
are nearby train stations, these need
to be modified or rebuilt to suit the
new rail level. Additional pedestrian or
cycling bridges may be used to
improve access across the lowered railway.
Road over rail—the rail line remains at
its existing level and a road bridge is
constructed over it. Local road and
pedestrian accessibility is maintained
with local service roads or by providing
alternative access. This does not
generally require any modifications to
rail platforms because the level of the
rail does not change. Where there are nearby train stations, access to them
needs to be maintained.
Road under rail—the road is lowered
to go beneath the rail line. A rail bridge
is built to allow the rail to remain at its
existing level. Local road and pedestrian
accessibility is maintained with local
service roads or by providing
alternative access. Where there are
nearby train stations, access to them
needs to be maintained.
VAGO, based on information provided by LXRA. Photographs courtesy of LXRA.

Other options for grade separations include:
 hybrid options—involve raising or lowering both road and rail instead of only
one
 closure—closing the level crossing. This option provides no new alternative
crossing of the rail corridor and road traffic must find an alternate route.

The LXRP is one of the Victorian Government’s key transport infrastructure
Level Crossing projects. Its stated aim is to remove 50 of the most dangerous and congested
Removal Program level crossings by 2022. In May 2015, as part of the Budget, government
announced an interim target of 20 removals by 2018.
Since LXRP’s announcement, the LXRA has identified two additional level
crossings for removal, bringing the total to 52—see Appendix B for a full list.
Figure 1C shows the location of these crossings.

Locations of the level crossings to be removed under the LXRP

VAGO, based on information provided by LXRA.

The stated benefits of the LXRP are diverse. They include to deliver significant
safety improvements for drivers and pedestrians, improve travel around
Melbourne and enable more trains to run more often and on time.
Level crossing removal packages
Level crossings will be removed along most Metropolitan train lines. The
Cranbourne-Pakenham line will have the most removals, however, these will
only amount to 52 per cent of the level crossings on that line—see Figure 1D.

Level crossing removal by metropolitan train line
Level crossings
35
43%
30
52%
25 13%
20 11%
13%
15 43%
0%
30%
10 38%
17% 29% 33%
5 50%
0% 0%
0
Train line
Level crossings remaining Level crossings to be removed by LXRP



Individual level crossing removal sites are grouped into delivery packages—see
Figure 1E.

Package Level crossings included
Package 1 North Road, Ormond; McKinnon Road,
McKinnon; Centre Road, Bentleigh; Burke Road,
Glen Iris
Package 2 Main Road and Furlong Road, St Albans;
Blackburn Road, Blackburn; Heatherdale Road,
Mitcham
Package 3 (CTD) Grange Road and Koornang Road, Carnegie;
Murrumbeena Road, Murrumbeena; Poath
Road, Hughesdale; Clayton Road and Centre
Road, Clayton; Corrigan Road, Heatherton Road
and Chandler Road, Noble Park
Package 4 Scoresby Road and Mountain Highway,
Bayswater
Melton Highway Melton Highway, Sydenham
Thompsons Road Thompsons Road, Lyndhurst
North Eastern Package Lower Plenty Road, Rosanna; Grange Road,
Alphington; Bell Street, Preston; High Street,
Reservoir
North Western Package Bell Street, Coburg; Buckley Street, Essendon;
Camp Road, Campbellfield; Glenroy Road,
Glenroy; Moreland Road, Brunswick; Skye Road,
Frankston
Western Package Abbotts Road, Dandenong South; Aviation Road,
Laverton; Cherry Street and Werribee Street,
Werribee; Ferguson Street, Williamstown;
Kororoit Creek Road, Williamstown North
Southern Package Balcombe Road, Mentone; Charman Road and
Park Road, Cheltenham; Edithvale Road,
Edithvale; Eel Race Road and Station Street,
Carrum; Seaford Road, Seaford; Bondi Road and
Mascot Avenue, Bonbeach
Unallocated level Clyde Road, Berwick; Hallam Road, Hallam;
crossings Manchester Road, Mooroolbark; Maroondah
Highway, Lilydale; South Gippsland Highway,
Dandenong; Toorak Road, Kooyong


Each package has its own governance arrangements that include:
 a project director
 a project team, consisting of senior project managers, project managers,
senior project/design engineers, and project control/support officers.
The project director reports to the LXRA Chief Operating Officer, who reports to
the Chief Executive Officer.
The project teams are supported by functional teams that include
communications and stakeholder relations staff, safety staff, cost controllers and
commercial managers.
VicRoads had commenced work on the procurement and construction of
Status of the 10 level crossing removals prior to the establishment of LXRA. The LXRP
Level Crossing incorporated these crossings. The status of those crossings was:
Removal Program  four sites had already completed full business cases—Blackburn Road, Main
Road, Burke Road and North Road
 four sites had prepared project proposals—McKinnon Road, Centre Road
(Bentleigh), Furlong Road and Heatherdale Road
 two sites had completed preliminary planning and a business case—
Mountain Highway and Scoresby Road.
All 52 level crossings are planned to be removed by 2022. While an interim
target of removing 20 crossings by 2018 was set in 2015, LXRA is now intending
to complete up to 28 by 2018. The 2017–18 State Budget brought forward
additional funding to achieve this outcome.
By September 2017, LXRA had removed 10 crossings, with another 16 in the
design and construction stage—see Figure 1F.

LXRP status as at September 2017
Early planning
6 crossings
12%
Removed
10 crossings
19%
In tender
9 crossings
17%
Design and
construction
Contract awarded 16 crossings
11 crossings 31%
21%

‘Contract awarded’ includes additional works packages.
VAGO, based on information on LXRA’s website.

Some level crossing removals are part of the government’s program of major rail
Integration network upgrades. This includes the removal of nine level crossings on the
with other Caulfield-Dandenong corridor and three level crossings on the Sunbury corridor
to allow for the rail service increases planned as part of the CPLU and MTP.
transport projects
Coordination between the LXRP and other major transport projects is important
for the development of Melbourne’s future transport network.
Project governance is about guiding and monitoring the delivery of intended
Governance benefits and outcomes. The DTF project governance guidelines state that there
framework are four key principles for effective project governance:
 establish a single point of overall accountability
 service delivery ownership determines project ownership
 project decision-making is separate to stakeholder management
 distinction between project governance and organisational structures.
HVHR investments require greater scrutiny and support from central agencies.
Major transport infrastructure program
The LXRP is part of DEDJTR’s Major Transport Infrastructure Program (MTIP)
governance framework. Figure 1G outlines this framework.
As government has approved key decisions for the LXRP (including the scope,
budget and procurement approach), the governance focus is now on project
delivery.
Ultimately, the government is required to approve the LXRP business case,
project proposals or works packages, and funding for project delivery.


Governance for the MTIP
DEDJTR DPC
Secretary Secretary
TfV
Project client
Coordinator-General Infrastructure Coordination
(MTIP) Committee
Provides a forum for discussing
Oversees the delivery of the
project matters and informing
LXRP as part of a suite of
departments heads.
transport infrastructure projects Transport Infrastructure
that includes the MTP, the Policy, Planning and
Mernda Rail Extension, the West Delivery Committee
Gate Tunnel and North East Link.

Major Projects
Steering Committee
LXRA
Key forum for project decisions.
Its role is to ensure that major
transport projects are developed
in accordance with strategic
directions set by the Transport
Infrastructure Policy, Planning
and Delivery Committee.
Includes representation from
DEDJTR, portfolio agencies—
Chief Executive Officer including PTV and VicRoads—as
well as from DPC and DTF.



Project delivery
Figure 1H shows the framework for the delivery stage of the LXRP.

LXRP project delivery governance framework
Minister for Public Transport
DEDJTR Secretary
Coordinator-General—MTIP Board
LXRA Chief Executive Officer
Project Steering Committee
LXRA PTV MTM VicRoads V/Line VicTrack TfV
LXRA project teams

VAGO, based on information provided by TfV.
The Major Transport Infrastructure Board advises the Coordinator-General of
the MTIP on the delivery of the program. It includes independent members,
industry experts and the Coordinator-General. LXRA reports monthly to the
MTIP Board on the progress of the LXRP, including delivery, safety and finance
issues, and key risks.


LXRA established a Project Steering Committee to:
 oversee the progress and implementation of the LXRP
 consider operational impacts on the rail and road network and franchise
arrangements
 approve plans for level crossing site occupations
 endorse the scope and technical requirements for the project, including
agreeing on standards and requirements
 discuss, but not determine, any change to the project scope or time lines
 ensure that objectives and key deliverables are met
 ensure that all stakeholders are kept informed about the progress and status
 resolve disputes arising between the parties
 note monthly reports provided by LXRA, PTV or MTM.
LXRA’s Chief Operating Officer chairs the Project Steering Committee which
comprises senior representation from PTV, VicRoads, V/Line, VicTrack, MTM and
TfV.
Governance prior to LXRA
DEDJTR, PTV and VicRoads were accountable for the finalisation of the project
development stage, including the business cases and project proposals prior to
LXRA. This audit does not focus on the project prior to LXRA’s establishment.
Level Crossing Removal Authority
Agency roles
The government established LXRA in March 2015 as an administrative office
within DEDJTR to manage the delivery of the LXRP, the Mernda Rail Extension
and any other project as required. As stated in the LXRP business case, LXRA will
oversee the LXRP’s implementation and delivery of expected benefits.
Department of Economic Development, Jobs, Transport
and Resources
DEDJTR is responsible for the integration of transport projects into the overall
transport network. The Coordinator-General sits within DEDJTR and has
responsibility for overseeing the MTIP.
The Coordinator-General provides strategic advice on progress towards
achieving the intended project benefits to the Premier, the Minister for
Public Transport and the Minister for Roads and Road Safety, as well as the
Secretary of DEDJTR and the Head of TfV. The Coordinator-General also provides
assurance regarding the planning, procurement and delivery of the projects.

Transport for Victoria
Formally established in April 2017, TfV is the state’s lead transport agency.
TfV’s objective is to bring together the planning and coordination of Victoria’s
transport system and agencies, including VicRoads and PTV, and to integrate
Victoria’s transport system to connect people, places and opportunities.
VicRoads
VicRoads’ purpose is to deliver social, economic and environmental benefits to
communities throughout Victoria by managing the state’s arterial road network
and its use as an integral part of the overall transport system.
Public Transport Victoria
PTV was established in April 2012. In September 2016, PTV received a
ministerial direction to undertake a network integrity and assurance role,
to ensure:
 the public transport network remains functionally effective, reliable,
maintainable, secure, safe and environmentally compatible as it evolves
through future investment
 capital programs are aligned to network requirements and standards
 the readiness of the operating environment to implement investments into
the transport network.
Prior to the establishment of TfV, PTV was also responsible for detailed public
transport network and service planning.
VicTrack
Created in 1997, VicTrack is a state-owned business operating under the
Transport Integration Act 2010. It owns Victoria’s railway land, infrastructure
and assets. Through a subsidiary—the Rolling Stock Holdings group of
companies—it also owns much of the state’s rolling stock (trains and trams).
VicTrack leases train and tram infrastructure and assets to PTV, which then
sub-leases the infrastructure and assets to the metropolitan train and tram
operators and V/Line. VicTrack also has a role in providing telecommunications
services to operators.


The Transport Integration Act 2010 requires that all decisions affecting the
Relevant transport system are made within the same decision-making framework, to
legislation support the provision of an integrated and sustainable transport system. The
Act:
 encourages transport agencies to work together toward the common goal of
an integrated and sustainable transport system
 makes it clear that the transport system needs to be sustainable
economically, environmentally and socially
 provides a framework for integrated transport policy and operations
 recognises that the transport system should be thought of as a single system
performing multiple tasks rather than separate or competing transport
modes
 integrates land use and transport planning and decision-making by
extending the policy framework to land use agencies which significantly
impact the transport system
 establishes transport bodies with consistent charters to deliver outcomes
aligned to the overall vision and objectives of the Act.
The LXRP faces a number of challenges including its large scale, engineering
Why this audit complexity, short delivery time frame and budget pressures. Elements of the
is important project have attracted criticism, particularly grade separation options.
The LXRP is designed to contribute to longer-term improvements to the road
and rail network by easing transport congestion and delivering a safer and more
efficient road network. This audit, at this point in time, serves to identify the
risks, lessons and opportunities for improvement for future works.
This audit examined whether the LXRP has been cost-effective in improving,
What this or potentially improving, the safety and efficiency of the state’s road and rail
audit examined network. Our audit focused on DEDJTR’s role, LXRA’s role in program delivery
and how and benefits monitoring, and TfV’s role in providing oversight and strategic
focus for the LXRP.
Other agencies in the scope of this audit are PTV, VicRoads and VicTrack.
The audit methods included:
 interviews with agency and departmental staff, and site visits
 review of strategies, program delivery documents, business case, and
Cabinet material
 analysis of datasets relating to road and level crossing safety, traffic
congestion and rail services.
We conducted this audit in accordance with section 15 of the Audit Act 1994
and the Australian Auditing and Assurance Standards. The cost of the audit was
$530 000.

The rest of this report is structured as follows:
Report  Part 2 examines the basis for program investment and decision-making
structure  Part 3 analyses program procurement, packaging and sequencing of works
 Part 4 looks at the intended program benefits
 Part 5 examines network integration and integrity.


Level crossing
selection and cost
A comprehensive business case is important for large investments and should
be prepared prior to making an investment decision. It provides confidence to
decision-makers that the:
 strategic justification for the investment is valid
 right investment option is selected
 government can deliver the investment as planned.
DTF’s HVHR guidance states that the business case should consider the whole
investment life cycle and that its role changes from one stage to another. In later
stages, government uses it to ensure that it is delivering the investment as
planned. If there are any changes, agencies should update the business case and
assess the ongoing business justification in light of the new details.
The LXRP business case was completed prior to the addition of the two extra
crossings, and covers only 50.
Weaknesses in the LXRP business case undermine its value and ability to
Conclusion provide a sound basis for the government’s decision to commit to the
investment. The government’s election commitment was the basis for the
selection of sites for the LXRP.
Not all of the selected level crossings are among the 50 most dangerous and
congested. However, post-election advice to government did not test the
validity of the selected sites against other site options.
The government has consistently stated that the main objective of the LXRP is
Site to remove 50 of the most dangerous and congested level crossings. This is not
prioritisation and consistent with the LXRP business case, as it omits the word ‘most’.
selection As the sites identified for removal were part of an election commitment,
DEDJTR decided not to assess the merits of their selection. As a result, there is
no analysis or rationale in the business case or other documentation about why
the 50 level crossings selected were given priority.

The role of the public service to provide full and frank advice was not realised in
this case. DEDJTR should have advised the incoming government that an
analysis was needed of the selected sites against the stated program objective
of removing 50 of the most dangerous and congested level crossings. A 2015
DTF gateway review of the business case identified these issues.
There was a range of guidance, summarised in Figure 2A, available to inform the
prioritisation of level crossings for removal. DEDJTR could have used this to
validate or test the merits of the sites chosen.
In the absence of program-specific analysis, aligning site-specific conditions to
criteria linked to the expected benefits of the LXRP, government cannot be
assured that its investment in the removal of 50 level crossings is targeted
appropriately.

Guidance for prioritising level crossing removals
Australian Level Crossing Assessment Model (ALCAM)
ALCAM is a tool for identifying key potential risks or deficiencies at level crossings and for prioritising
crossings for upgrades. It has three components:
 infrastructure factor—which considers how the physical properties at each site will affect human
behaviour
 exposure factor—which considers the baseline likelihood of an accident at a level crossing, excluding
site-specific conditions that are captured in the infrastructure factor
 consequence factor—which considers the seriousness of a collision at a crossing in terms of fatalities
and injuries.
When combined, these three components produce a unique risk score for each level crossing.
Level crossing surveys are used to update the risk profiles for each crossing. A survey of level crossings occurs
approximately every five years. A Victorian list was last publicly released in 2008, by the then Department of
Transport.
VicRoads strategic framework
VicRoads created a strategic framework to provide guidance on the prioritisation of level crossings for
removal in metropolitan Melbourne. Completed in June 2014, the framework used 2013 data and was
publicly available in October 2015.
VicRoads assessed each level crossing against the following weighted criteria to determine priority:
 the crossing’s strategic fit in the transport network (60 per cent)
 potential environmental and economic benefits (25 per cent)
 safety (15 per cent).
The framework rated crossings as either high, medium, lower or no priority. VicRoads developed two priority
lists of level crossing sites for removal—a 2013 priority list and a 2022 forecast priority list.
Royal Automobile Club of Victoria (RACV) prioritisation list
In February 2013, the RACV published a priority list of 31 level crossings for removal. Project 10 000 cites the
RACV prioritisation list as a source for the government’s removal program.
VAGO.

Our analysis of the 50 LXRP sites in the business case compared to the publicly
available ALCAM list for 2008 shows around 62 per cent of the LXRP crossings
(31 sites) are in the top 50 metropolitan crossings on this list—see Figure 2B.
Appendix C contains the ALCAM 2008 list excluding crossings removed before
LXRP.

LXRP crossings compared to ALCAM 2008 list
Key:  Level crossings for removal under the LXRP;  the 50 highest-risk level crossings according to ALCAM 2008 as per
Appendix C; level crossings that are both listed for removal under the LXRP and among the 50 highest-risk level crossings
according to ALCAM 2008.
This map shows only the original 50 sites of the LXRP.
VAGO.
Our analysis shows that LXRP will remove 16 of the 20 crossings (80 per cent)
that VicRoads rated as high priority in its 2013 list, and five of the nine crossings
(56 per cent) rated medium priority—see Figure 2C. However, VicRoads rated
29 crossings in the LXRP lower or no priority—see Appendix D.

LXRP crossings compared to VicRoads 2013 list

Key:  level crossings for removal under the LXRP;  level crossings identified in the VicRoads 2013 list;
level crossings that are both listed for removal under the LXRP and VicRoads in 2013.
This map shows only the original 50 sites of the LXRP.
VAGO.
Some of the sites in the LXRP are not highly ranked on either the VicRoads or
ALCAM lists. For example, VicRoads rated the following sites as no priority and
they also received relatively low priority on the full ALCAM 2008 list:
 Camp Road, Campbellfield (ALCAM rank 144)
 Kororoit Creek Road, Williamstown North (ALCAM rank 139)
 Abbotts Road, Dandenong South (ALCAM rank 132)
 Manchester Road, Mooroolbark (ALCAM rank 130).
In contrast, the following sites are not included in the LXRP, despite being high
priority on the VicRoads list, with one site in the top 50 of the ALCAM list:
 Union Road, Surrey Hills (ALCAM rank 13)
 Glenferrie Road, Kooyong (ALCAM rank 67)
 Glen Huntly Road, Glen Huntly (ALCAM rank 71)
 Madden Grove, Burnley (ALCAM rank 72).

This shows that the LXRP is not meeting its stated objective of removing 50 of
the most dangerous crossings in Melbourne.
Options assessment is used to identify the most appropriate grade separation
Options option for each site. LXRA and VicRoads completed options assessments
assessment for 20 crossings before the business case was completed. LXRA’s options
assessments for the remaining 30 crossings, developed as part of the business
case, differ in approach and level of detail to the first 20.
The remainder of Section 2.3 focuses on options assessments for the remaining
30 sites.
Options assessment framework
DEDJTR developed a framework to assess and shortlist grade separation
options at each of the 30 sites. Application of this framework aims to ensure
that the chosen options are cost-effective and defensible, and the process is
comprehensive, transparent and consistent. The framework is detailed in
Figure 2D.

Options assessment framework
Assessment
Stage phase Description
Business case Initial feasibility Identifies options that are not
assessment technically feasible to implement. This
results in a shorter list of options for
assessment in the next phase.
Rapid Identifies options for further
assessment development—around four to five.
It is a qualitative assessment of the
performance of options against the
project objectives and outcomes.
Detailed A detailed evaluation of the
assessment performance and impacts of the
remaining options, to identify between
one and three options to take forward
to the next phase.
Project/works Final A further detailed assessment of the
package assessment remaining options using more
proposals developed design documentation to
inform the scope of the recommended
reference solution.
Procurement Market-based An assessment of proposals put forward
assessment by bidders during the procurement stage
to ensure that the proposed solution still
meets project objectives.

The options assessment framework includes a multi-criteria analysis tool to
select reference options for inclusion in the business case and the preferred
solution to present to government. As LXRA completes further technical
investigation and consultation for each site, it reapplies the tool using the
updated information.
LXRA does not directly assess primary criteria. It rates an option’s performance
as either strong, average or poor against each secondary criterion. While there
is guidance on what constitutes strong, average or poor performance, the
criteria are not weighted. This means that there is no indication of the relative
importance of each criterion.
Changes to the multi-criteria analysis tool
Under the options assessment framework—see Figure 2D—LXRA should reapply
the multi-criteria analysis tool to options once it has gathered more detailed site
information. In the final assessment phase for sites in the Southern package,
LXRA used a different set of criteria.
Figure 2E lists the criteria applied to the Southern sites and those applied to all
other sites to date.
LXRA advised that it did this to accommodate additional information gathered
about the Southern package sites through more detailed analysis and
community consultation. However, the existing option assessment framework is
designed to incorporate additional information as site investigation proceeds.


Assessment criteria
Southern sites All other sites (business case)
Category Secondary criteria Primary criteria Secondary criteria
Adjacent properties Property acquisition Alignment with More reliable and efficient
Voluntary Purchase Scheme program transport networks
Permanent land use changes benefits Better connected, liveable
Noise communities
Visual impact/views Safer communities
Overshadowing Project Capital cost
Overlooking outcomes Whole-of-life cost
Community and Cross-corridor connectivity Value-capture opportunities
stakeholders Shared user paths Time frame
Linear/parks/landscaping Delivery risks
IDOs Protection of future assets
Environment and Environment impact Project Land acquisition impacts
sustainability Heritage impact impacts Land use impacts
Flooding risk Environment impacts
Contaminated soil Temporary impacts
Construction Utility service impact
impact Rail closures
Road closures
Station closures
Car park closures
Delivery risk
Cost Capital cost
There are important differences between the two sets of criteria. In particular,
the Southern sites’ criteria place more emphasis on adjacent properties and do
not consider whole-of-life cost. LXRA’s assessment using the modified criteria
produced similar results to the original assessments in this instance. However,
the decision to change the criteria indicates that LXRA has not consistently or
transparently applied the options assessment framework.
Approval of options
LXRA refers all preferred options to the Minister for Public Transport (the
Minister) for approval. The Minister may approve the option or, where it is likely
to be contentious with key stakeholders, refer the site to government for
endorsement.
How LXRA identifies sites as contentious is not clear. LXRA advises that the
decision to refer a site to Cabinet is determined by the Minister. LXRA does not
document this decision.

Community consultation during options assessment
LXRA’s community consultation during the options assessment process differs
between packages. LXRA relied on the market to create innovative design
solutions in one of the largest packages of works—CTD. The community
consultation for this site happened concurrently with the tender process. This
limited the role that community views could play in the options assessment
process, as shown in the case study in Figure 2F.

Case study: Consultation for the CTD package
Community consultation for the CTD package occurred at the same time as
the tender process. LXRA advised that, as a result, probity and commercial
confidentiality requirements limited the information that it was able to
share with the public.
LXRA started raising public awareness of the project in May 2015 and
gathered initial community input on design in July 2015. At the same time, it
released the request for proposal to two shortlisted parties.
During the request for proposal period, LXRA’s community consultation
efforts included briefings, workshops and feedback sessions aimed at
allowing community members to view design concepts. It also included a
Community Tender Advisory Panel that consisted of representatives from
the community and stakeholder groups. The panel served as a proxy for
wider community consultation by giving feedback on design solutions at key
points during the tender process.
As the request for proposal was occurring concurrently, the panel was
bound by confidentiality provisions. LXRA advised that this panel allowed it
to gather community feedback on the design without breaching
confidentiality and probity arrangements. In February 2016, LXRA
announced a preferred party and the preferred design solution. Throughout
February and March 2016, LXRA sought community feedback about the
preferred rail-over-road solution.
The feedback indicated that there was significant opposition from adjacent
residents and traders due to concerns over amenity and noise. In advice to
government, LXRA defended the rail-over-road solution as performing
substantially better than other options. It also cautioned that a complete
redesign prior to awarding the contract could have serious probity and legal
implications, resulting in a need to re-tender the project.
LXRA introduced a range of measures to mitigate the impact of elevated rail
on the community, including open spaces, landscaping and a voluntary
purchase scheme for properties abutting the corridor. The combined cost of
these measures was $49.6 million⁽ᵃ⁾.
(a) Voluntary purchase scheme accounts for $17.26 million of $49.6 million.


In contrast, Figure 2G provides an example of LXRA integrating community
consultation into the options assessment process.

Case study: Southern package consultation time line
Community consultation for sites on the Frankston line commenced well
before procurement for the package in January 2017. In September and
October 2016, LXRA sought feedback from the community on possible
design solutions for the sites. The consultation findings showed community
opposition to rail-over-road solutions.
In December 2016, LXRA presented these findings to government, along
with a detailed options analysis for each site. Although LXRA’s options
analysis showed that rail-over-road solutions generally performed better,
government elected to change five sites to rail under road. LXRA advised
that as it had not yet released tender documentation, there were no probity
or legal concerns about changing design solutions.
These examples demonstrate that the timing of consultation has a big impact on
the role community views can play in options assessment. LXRA used the
lessons learned from CTD, and applied them to the Southern package. By
consulting with the community on design options prior to commencing
procurement for the Southern package, LXRA was able to better understand and
integrate community views into its advice to government and options
assessment process.
Cost estimates for reference options
As part of the detailed assessment phase of the options assessment framework,
LXRA produced cost estimates for each shortlisted grade separation option. The
LXRP business case, however, does not present this range of cost estimates for
grade separation options.
Although LXRA completed cost estimates for one to four grade separation
options, the business case only included the cost of one reference option.
These options represented a point-in-time view—for February 2016—of the
estimated cost of how LXRA could deliver the program. The business case did
not include the potential maximum and minimum costs of other options, as
shown in Figure 2H.

Comparative cost estimates for the remaining 30 sites
$ billion
7
6 6.49
4 4.44
3 3.57
0
Minimum Reference options Maximum

Reference options cost does not include packaging savings.
VAGO, based on information from LXRA project option reports.
As LXRA developed the reference options with limited stakeholder and
community consultation, there was a significant risk that the proposed
reference option could change and impact on program costs.
This risk has subsequently materialised. There have been multiple changes from
reference options, resulting in increases to the total program cost.
Changes from reference options
LXRA is undertaking further investigation and public consultation at individual
sites as the LXRP rolls out. As a result, LXRA is recommending different design
solutions from the reference options—as shown in Figure 2I. LXRA submits
proposed new solutions, together with additional funding requirements, to
government for approval.

Changes from reference options for the remaining 30 sites
Relocated 5
(crossing on adjacent site) 7
Rail over road hybrid 4
(road lowered) 3
1
Road under rail
1
10
Rail over road
14
2
Road over rail
2
8
Rail under road
3
Current solution Reference option

Status at July 2017.
The most significant changes are the five additional rail-under-road solutions
and four fewer rail-over-road solutions. Based on advice LXRA provided to
government, changing a site from rail-over-road to a rail-under-road solution
could increase the cost of that removal by an average of $18 million, and up to
$100 million for more complex sites, such as those on the Frankston line.
The business case did not adhere to the HVHR guidelines in a number of ways,
Program cost including by:
 not providing cost estimates for more than one option per site—the HVHR
guidelines expect project options to be thoroughly analysed in the business
case, including expressing a cost range
 basing business case costings on a like-for-like replacement of existing
infrastructure
 not considering operational or maintenance costs, or other rail programs
impacting the LXRP
 not updating the business case to reflect ongoing changes to program cost
estimates—these changes include the addition of two level crossing removal
sites and changes to preferred reference options.


The cumulative cost of the program has increased since the initial funding
announcement in 2015, as shown in Figure 2J.

LXRP cost
$ billion
9 8.3
7.6 7.8
8
7
6.0
6
5
4
3
2
1
0
2014–15 2015–16 2016–17 2017–18

The $6.0 billion in 2014–15 represents the $5–6 billion range quoted as part of
government’s election commitment.
The $7.6 billion in 2015–16 represents the program cost identified in the business case.
VAGO from information provided by LXRA.
The business case provides a total program cost estimate of $7.6 billion—made
LXRP associated network
up of $6.6 billion for level crossings and $1.0 billion in associated network
improvements are
additional works improvements. An HVHR gateway review of this business case highlighted that
delivered with level the program cost in the business case is greater than the $5–6 billion election
crossing removals, such commitment.
as new train stations and
improved public transport The cost of the program as at July 2017 is $8.3 billion. This represents an
access. increase of more than 38 per cent—based on the initial estimate of $5–6 billion.
The cost increase is mostly due to changes in the recommended options,
particularly for the sites along the Frankston line.
Cost of works packages
The cost of packages is included in the total program cost. As at July 2017,
the program’s forecast final cost is $306.3 million over the approved
individual work package budgets, excluding program risk. The majority of
the budget overrun is from the CTD package—$302.9 million. This is due to
a number of factors including the complexity of the construction method,
poorer-than-expected site conditions and additional scope in response to
stakeholder and community feedback.

Other costs
Futureproofing works
The business case provides for the construction of futureproofing works for
13 of the 16 crossings identified as requiring such works. These works include:
 increasing station platform length
 widening the rail corridor
 building wider road bridges.
LXRA will make provisions for the remaining three crossings—for example, by
setting aside the required land—but will not construct the works as part of the
current program.
The business case estimates the cost of futureproofing works at all 16 sites
to be $148 million. This is less than 2 per cent of the $7.6 billion project cost
identified in the business case. As LXRA does not track spend on futureproofing
items, we are unable to confirm the additional costs of the works undertaken to
date.
Power upgrades
Additional works such as upgrades to the traction power network or signal
power at a number of crossings were not included in the business case.
Figure 2K demonstrates the implications of changing network electrical
standards.

Case study: Implications of changing a network electrical standard
MTM and PTV have an agreed electrical network standard requiring a
minimum 1 300 volts under normal conditions and 1 150 volts for first-order
traction power failure conditions. The standard allows for changes to the
service plan including the integration of HCMT rolling stock and proposed
service level changes. The majority of the traction power network does not
comply with the new standard.
The LXRP business case is based on maintaining existing network capacity.
LXRP provides for the removal and replacement of overhead systems and
associated infrastructure only where the removal requires new track.
New substations for future traction power requirements were specifically
excluded from the business case cost estimates, as the LXRP is not a network
upgrade project.
MTM electrical standards—for traction power and signal power—have been in
place since January 2015 and should have been considered when the business
case was being developed. As the business case did not consider this electrical
standard, unplanned scope and design changes have been necessary.


Cost–benefit analysis
Although a cost–benefit analysis (CBA) is the key metric for evaluating the
quantitative economic merit of the program, government decided to fund the
LXRP prior to the completion of the business case.
The LXRP’s CBA conforms to the HVHR guidelines and applies the recommended
discount rate of 7 per cent for this type of project. Sensitivity testing which
includes the application of a 10 per cent discount rate was also completed.
In its appraisal, DEDJTR has quantified core benefits using an approach that
The Victorian Integrated
Transport Model is the primarily relies on the Victorian Integrated Transport Model. See Appendix E for
state’s main strategic a summary of the core quantifiable benefits in its program appraisal.
transport model that
predicts changes in Benefit–cost ratio
overall transport demand
and mode choice. BCR attempts to identify the relationship between the costs and benefits of a
project. If a project’s BCR is:
 greater than one, it indicates that project benefits outweigh the cost
 less than one, the project’s costs outweigh the benefits.
Figure 2L provides a CBA summary for the three appraisal scenarios included in
the business case.

CBA summary
7 per cent
Scenario Benefits discount rate (real) BCR
LXRP (reference case) Core transport system benefits $4.7 billion 0.78
LXRP (reference case including Additional and wider economic $0.7 billion 0.9
additional and wider economic benefits
benefits)
Combined appraisal (LXRA, MTP Core transport system benefits $14 billion 1.2
and CPLU)
City-shaping benefits $3 billion
Productivity benefits $4 billion
As shown in Figure 2L, the LXRP reference case does not achieve a positive BCR
using the standard discount rate of 7 per cent. If the BCR was updated to
account for current program cost, assuming there are no further increases in
benefits, this would result in a reduced BCR.
Further, sensitivity testing identifies that if costs increase by 20 per cent, this
will result in a BCR of only 0.65 at this discount rate.
The cost at July 2017 stands at $8.3 billion, a 9 per cent increase on the
$7.6 billion in the business case. Given the LXRP has only removed 10 crossings
to date, with five years still remaining and more complex crossings to remove,
there is a real risk of further cost increases.

A BCR of 0.9 is achieved when wider economic benefits are included with the
reference case. However, DTF guidelines recommend excluding wider economic
benefits from the BCR calculation while appraising projects.
A positive BCR is only achieved for the combined appraisal, which includes the
total sum of benefits from all major rail projects—CPLU and the MTP—not just
the LXRP.
DEDJTR’s rationale for using this approach is that these projects are
interdependent, and the CPLU and MTP assume delivery of the LXRP. Therefore,
the projects were combined to look at the city-shaping benefits. This is a
reasonable approach as these are not mutually exclusive projects.
DEDJTR engaged a third party to peer review the economic evaluation of the
LXRP business case. A report was prepared which concluded that, overall, the
approaches as described in the economic evaluation appear appropriate for the
economic assessment of the LXRP.
TfV and LXRA should develop a robust selection and prioritisation process for
Strategic future level crossing removals so that the rationale for selecting sites is
planning for future transparent.
prioritisation Infrastructure Victoria’s 30-year infrastructure strategy recommends that the
government develop a transparent prioritisation process within five years for
the targeted removal of level crossings beyond its current commitments. It also
recommends that this process should build on work already completed by
VicRoads and consider desired land use outcomes, including supporting major
employment centres.
Activity to date
TfV is leading a planning study to identify potential future level crossing
removals as part of it network planning function. This study will:
 identify a list of initial priority sites for government to consider for early
removal in conjunction with the current committed program
 provide program options for government to identify future level crossing
removals.
The study will also consider the links to other planned network investments and
how these may offer opportunities to package them with the level crossing
removals.


Figure 2M shows the criteria TfV has developed to identify initial potential sites.

Criteria for identifying initial sites
Adjacency The site is adjacent to, and affects, an existing LXRP
site.
Major need The site will have very significant impacts on
congestion or safety, taking into consideration rail
service increases that have been enabled by other
projects that are being implemented.
Efficiency There may be significant cost efficiencies that could
opportunity be realised by delivering the level crossing removal in
conjunction with an existing LXRP site.
Potential sites must satisfy the criteria in Figure 2M before moving to the
program options assessment phase. TfV has also developed criteria for this
phase as shown in Figure 2N.

Criteria for identifying program options
Movement Amount of traffic (current and future), level crossing
boom gate closure times, the type of movements and
traffic using each crossing, train frequencies (current
and future) and strategic network considerations.
Safety Safety risk ratings (ALCAM) and incident records
(fatalities, serious injuries, near misses).
Place Activity areas, urban renewal and growth precincts,
community services and facilities, station access,
pedestrians, cyclists and emergency services.
Deliverability Cost, risk and packaging (considering rail occupations,
site adjacency, disruption and likely procurement
efficiencies).
While initial planning demonstrates TfV is working towards developing
criteria and a methodology to test sites, it is not evident if there will be a
criteria weighting system so that site assessment is objective and transparent.
Nor is it clear how TfV plans to determine which sites to test.


Procurement and delivery
Infrastructure project delivery should balance the control of project cost and
risk against achieving objectives and outcomes. It also requires agencies to
consider which delivery methods are available and best suited to achieve
economic and efficient delivery.
The need for LXRA to meet the government’s committed time frame for the
Conclusion LXRP has had an impact on procurement, packaging and sequencing. Although
the use of partial price competition saves time, it removes competitive tension
and, if not adequately managed, the LXRP is at risk of not maximising value for
money. It is too early to tell if LXRA is successfully mitigating this risk because
not all of its risk mitigation tools are fully developed.
LXRA has prioritised the removal of level crossings that had greater preparatory
work completed and less complex design solutions. This has brought forward
some removals, and LXRA now intends to exceed the target of 20 removals by
2018. The remaining crossings are more complex and potentially more
challenging to complete within the allocated time frame and budget.
LXRP sites are grouped into packages for tender. Traditional design and
Delivery construct contracts are being used to procure two sites and alliance contracts
models for all others.
Alliance contracting
The alliance contracting model involves a state agency (the owner) working
collaboratively with private sector parties, or non-owner participants (NOP), to
deliver a project. It requires parties to work together in good faith, act with
integrity and make decisions that are best for the project as a collaborative
team.
The key difference between a traditional contract model and an alliance
contract model is the allocation of risk. In traditional contract arrangements,
parties allocate risk to the party best able to deal with it. In contrast, parties to
an alliance contract share responsibility for managing all project risks.

Alliance contracting is useful when a project has risks that owners cannot
adequately define prior to commencement. The flexibility of the alliance model
allows parties to deal with new risks as they arise, rather than seek contract
variations.
There are three main approaches to pricing in alliance contracts:
 Competitive alliances (or full price competition)—where two or more
A target outturn cost is
shortlisted parties develop competing target outturn costs. According to the
the estimated actual cost
of designing, constructing National Alliance Contracting Guidelines (NACG)—which Victoria has
and delivering the project. adopted as its alliance contracting policy—owners should consider full price
competition as the default pricing position for any alliance.
 Partial price competition—where shortlisted parties only develop pricing for
some elements of the target outturn cost. The sole successful party then
prices the remaining target outturn cost elements alongside the owner.
 Non-price competition—where owners select private sector parties using
non-price selection criteria only, such as team capability and experience.
Figure 3A shows the contract and pricing models used by LXRA and VicRoads for
each package.

Contract and pricing model for LXRP delivery
Package Sites Contractual and pricing model Awarded by

Package 1 4 Competitive alliance for all sites VicRoads
Package 3—CTD 9 Competitive alliance for all sites LXRA
Melton Highway 1 Design and construct LXRA
Thompsons Road 1 Design and construct as part of VicRoads duplication of VicRoads
Thompsons Road
North Eastern package 4 Partial price competition alliance for all sites LXRA
North Western package 6 Competitive alliance for initial two sites; partial price LXRA
competition for additional four sites
Western package 6 Competitive alliance for initial one site; partial price LXRA
competition for additional five sites
Southern package 9 Competitive alliance for initial four sites; partial price LXRA
competition for additional five sites
Unallocated level crossings 6 LXRA to award these sites using partial price competition LXRA
to existing alliances dependent on performance

Partial price competition
Partial price competition contracts remove an element of competitive tension
from the tendering process. This can restrict an agency’s ability to achieve value
for money and can limit innovation in design and construction solutions.
To date, LXRA has used partial price competition to award two sites, both in the
North Eastern package. At the completion of the LXRP, LXRA will have used
partial price competition for 24 of the 52 level crossings.
Despite the NACG preferring competition as a default condition for alliances,
they permit the use of partial price competition in alliances in some
circumstances. However, the guidelines also state that agencies should seek an
exemption before proceeding with a non-competitive or partially competitive
alliance.
LXRA advised that exemptions were unnecessary as government approved each
procurement strategy and, in compliance with this approval, LXRA put in place
performance and benchmarking frameworks for comparing price and
productivity efficiencies.
North Eastern package
The North Eastern package is the only package where LXRA will use only partial
price competition.
The rationale for this decision was the need to fast track procurement for the
North Eastern package to meet the government’s commitments to remove
20 level crossings and duplicate the Hurstbridge line by 2018.
This is not consistent with the NACG. The need to accelerate procurement—in
most situations—does not justify using partial price competition. The exception
is a rare situation where the community needs construction to commence
immediately. LXRA has not argued that there is a need for immediate
commencement of the North Eastern package.
LXRA’s view is that the NACG does not apply as the LXRP time frame came from
a government direction. However, LXRA is ultimately responsible for advising
the government on the appropriateness of procurement strategies, including
whether they align with state policy.
In addition to meeting committed time frames, LXRA advised that partial price
competition presents other benefits to the project as it:
 secures resources prior to a market activity peak across Australia in
2019–22
 enables concurrent stakeholder consultation and constructor involvement
in options assessment.
However, these benefits also apply to other alliances where LXRA procured the
initial sites using full price competition. Over the life of the package, LXRA
should monitor, report on and commission an independent evaluation on
whether partial price competition has achieved value for money and delivered
on the benefits stated above.

LXRA devised a contract structure that allows it to defer pricing on some
Contract crossing removal sites for the North Eastern, North Western, Western and
structure Southern packages.
Parties competitively bid for the initial work package, which can include one to
four sites. If LXRA is satisfied with the alliance’s performance in delivering the
first site’s works, it will then ask the alliance to develop a formal proposal for the
additional sites in that package.
LXRA may approach other alliances or the wider market to deliver the additional
works if it is not satisfied with the alliance’s performance or proposal.
Appendix F shows the initial and additional works for each package. There are at
least two sites in each package that LXRA will allocate to an alliance without full
price competition.
Benefits of the contract structure
LXRA chose this contract structure based on lessons learned during VicRoads’
extended procurement process for early LXRP packages as well as its own
procurement of the CTD package. According to LXRA, one benefit of the
structure is that it keeps project teams together, resulting in productivity
improvements through the retention of staff and key knowledge and skills
throughout the whole process.
LXRA has identified other advantages with this contract structure, in terms of
engagement with the private sector—particularly, that it:
 allows LXRA to leverage contractor involvement in development and
communications processes
 enables contractors to lock in key resources that may be lost to other
infrastructure projects
 ensures stable engagement with the private sector
 reduces tendering costs and ensures focus is on the actual delivery of works
 allows the majority of procurement activity to be completed prior to peak
market activity in 2019–22.
As LXRA is yet to allocate any of the additional works to an alliance, it has not
tested the effectiveness of its contract structure. LXRA should monitor this
throughout the program.
Risks of the contract structure
LXRA’s contract structure introduces a number of risks to achieving value for
money and on-time project delivery, primarily due to the reduced price and
design competition. Parties may also engage in loss-leading behaviours in initial
tendering in order to secure the larger package of works.


DTF and DPC advice to government also identified potential risks:
 the selected party for the initial sites may have an incumbency advantage
when seeking the additional sites, due to existing knowledge, experience
and stakeholder relationships
 LXRA may need to return to the market if the selected proponent performs
poorly on the initial site(s), leading to significant program delay—this is
particularly the case with the Western program alliance which has only one
site in the initial works package.
These risks are compounded in the North Eastern package, where LXRA did not
use full price competition to procure a proponent for the initial sites.
Acknowledging these risks, LXRA is developing mitigation tools, as outlined in
Section 3.4.
LXRA is using benchmarking and commercial frameworks to manage the risks of
Management partial price competition and the contract structure.
of procurement
risks Benchmarking framework
LXRA’s benchmarking framework includes a tool for comparing price and
productivity efficiencies across the program alliances and allows LXRA to
consider whether a proposal achieves value for money.
The benchmarking tool contains a detailed breakdown of costs for each level
crossing removal in the program, as well as for some previously completed
removals. Where a project has not been completed or awarded, LXRA bases the
data on the business case cost estimate for that site. Data compiled in the tool
includes direct job costs such as signalling and landscaping, as well as design
and occupation costs.
LXRA also collates cost data according to grade separation type—for example,
rail under road—which enables it to develop and compare cost profiles for each
type of grade separation. This is an essential step as the type of grade
separation is a strong factor in determining the overall cost of a removal.
When LXRA awards contracts or completes level crossing removals, it replaces
estimates in the tool with contracted or actual costs. Therefore, as the program
continues, the tool will become more accurate and will provide a more
adequate control for procurement cost risks.
LXRA also uses an independent estimator to confirm that proponents have
priced their target outturn costs competitively and that they adequately reflect
the scope of work.


Limited application of benchmarking tool
To date, LXRA has only applied the benchmarking tool for the North Eastern
Program Alliance.
Government approved the procurement strategy for this package in May 2016,
subject to the Treasurer’s approval of a strong performance and benchmarking
regime. LXRA selected the preferred party for this package in August 2016. The
Treasurer only formally approved the benchmarking framework in
December 2016, shortly before approving the award of the contract in
January 2017. The short time frame between approval of the tool and the award
of the contract indicates that LXRA relied on the tool to mitigate procurement
risks prior to its formal approval. LXRA advised that DTF had viewed the tool and
informally approved its use prior to the Treasurer’s formal approval.
LXRA has advised that it will use the benchmarking tool when assessing future
proposals for additional works as a way to overcome the risks of a
non-competitive process. It is therefore important that LXRA continues to
update the tool with actual cost data as it becomes available and integrate it
into future procurements.
While the benchmarking tool has the potential to allow LXRA to monitor value
for money, it cannot, on its own, drive innovation in design and construction
solutions. LXRA uses the commercial frameworks of its alliances to motivate
NOPs to find innovative construction and design solutions.
Commercial frameworks
LXRA is using the commercial framework of its alliance agreements to mitigate
the risks of its procurement strategy. The commercial framework sets out the
structure and principles that govern remuneration for the project. It includes
the following three main elements:
 reimbursable costs—NOPs’ actual direct project costs
 corporate overhead and profit
 a risk and reward regime.
Direct costs, corporate overhead and profit
LXRA sets some financial elements for all of its alliances using full price
competition. This is what makes LXRA’s alliances—excluding CTD—partially
competitive rather than non-competitive. These elements serve as a control for
the risks of LXRA’s deferred pricing contract structure. The largest element set
this way is corporate overhead and profit.
When awarding the initial works packages, LXRA locks in overhead and profit for
all remaining sites in the package. Overhead and profit as a percentage of direct
job costs is lower for awarded packages using the deferred pricing model than
for the initial four alliances that did not use this model.

This could demonstrate that LXRA’s model is effectively engaging the market,
ensuring a steady pipeline of work that allows proponents to lower
procurement costs. However, there is a risk that parties have bid low on
overhead and profit with the expectation of increased direct job costs on later
sites. This highlights the need for LXRA to continue to update and apply the
benchmarking tool to effectively assess its proposals.
Risk and reward regimes
A risk and reward regime sets out the owner and NOPs’ share of the ‘pain or
gain’ outcome of the project. This involves comparing actual and target
performance in both cost and non-cost areas.
In terms of cost, parties essentially share in the cost underrun (gain share) or
overrun (pain share) of a project.
All of LXRA’s alliance contracts cap NOP pain share—the amount the NOP would
have to pay in the event of a cost overrun. This is standard practice in alliance
contracting. However, the NACG notes that owners should be cautious of such
caps. When the overrun exceeds the cap, the state effectively bears all project
risk beyond a certain point. This unequal risk exposure can put pressure on
collaborative alliance principles such as best-for-project decision-making.
NACG recommends that owners consider placing a reciprocal cap on the
amount NOPs can receive for a cost underrun. This helps to alleviate concerns
about the potential for NOPs to earn large profits.
LXRA applied a cap on pain share to three of its works packages. However, there
is no reciprocal cap on gain share for CTD. Packages 1, 2 and 4, awarded by
VicRoads, also do not have a cap on gain share.
For non-cost areas, the regime includes financial incentives for strong
performance and penalties for poor performance. A risk and reward regime is a
key element of the collaborative nature of alliances.
LXRA’s risk and reward regimes are generally in line with NACG. Although the
regime is slightly different for each package of works, each one includes a clear
method of calculating performance. LXRA uses its risk and reward regimes to
motivate strong performance in areas such as safety, minimising passenger
disruptions, continuous improvement and stakeholder management. This
mitigates the risks introduced by partial price competition.
LXRA intends to use its risk and reward regimes to measure alliance
performance during project delivery. In particular, LXRA intends to apply a ‘track
record’ test to determine whether an alliance has performed well enough to
merit allocation of additional sites within the package. The track record test
assesses alliance performance against KPIs, package cost risk or reward regime,
and any other measures LXRA deems necessary to assess performance.
If LXRA applies this consistently, it will mitigate the risk of parties having an
incumbency advantage when seeking further sites.


Packaging
Packaging and
sequencing Dividing the LXRP into packages of work is beneficial for LXRA as it can match
level crossing removals to rail capacity investments, road projects or other
of works
works. Packaging also provides a more predictable pipeline of work for industry.
LXRA estimated that packaging level crossing removals, as opposed to
individually removing them, would save approximately $400 million across the
program.
Packaging options
The LXRP business case considered two options for packaging the remaining
301 level crossing removals, namely:
 a corridor approach—in which crossing sites along rail corridors are
packaged together
 a discipline-based approach—where similar work types are packaged
together (such as stations, power, signalling, and rail track).
LXRA’s evaluation of these two options emphasised that time, management of
disruptions and risk management were important considerations. LXRA
ultimately determined that the corridor approach better matched the LXRP’s
objectives.
The business case also considered the number of crossings in work packages.
Analysis of previous procurement processes found larger package sizes could
result in savings as they provide efficiencies with staff, site facilities, design,
occupation and direct costs. LXRA balanced these potential savings from larger
package sizes with market participation and capacity limitations to facilitate
competition for packages.
Packages of work
Of the 52 level crossing removal sites, eight packages contain between two
and nine level crossings and two packages have one crossing each. There are
six crossings that LXRA has not yet allocated to a package.
Figure 3B shows that the LXRP has packaged the majority of crossings according
to their rail corridor location.

1 The business case was completed prior to the addition of the two extra crossings.

Key:  Melton Highway,  North Eastern,  North Western,  Southern,  Western,  Package 1,  Package 2,  Package 3,
 Package 4,  Thompsons Road,  Unallocated.
Source: VAGO, based on information provided by LXRA.
LXRA has not packaged three crossings within the relevant corridor:
 Abbotts Road, Dandenong South—Western package
 Toorak Road, Kooyong—unallocated ‘package’, yet in close proximity to, and
on the same line as, Burke Road, Glen Iris (Package 1)
 Skye Road, Frankston—North Western package.
The level crossing at Skye Road was initially part of the Frankston package,
consistent with the corridor approach. However, following a decision to
accelerate the removal of this level crossing, LXRA moved it to another
alliance—North Western package—as described in Figure 3C.

Case study: Acceleration of Skye Road crossing removal
Skye Road is the most southern crossing on the Frankston line in the LXRP.
While it was in the top 50 most dangerous metropolitan crossings on the
ALCAM 2008 list, VicRoads rated it as no priority in its 2013 list and it was
not on RACV’s 2013 priority list.
LXRA initially listed this crossing as part of the Frankston package—later
renamed the Southern package—as additional work.
In December 2016, LXRA provided advice to government on accelerating the
removal of the Skye Road crossing by moving it to the North Western
package, as initial work. Advice to government emphasised the benefits of
acceleration, and stated that the change would achieve a value-for-money
outcome for the state. However, it did not include the expected acceleration
cost, relative priority for removal, or disadvantages of accelerating the
removal.
LXRA advised that the main benefit achieved would be to bring forward the
commencement of the removal by one year, from mid-2018 to mid-2017.
LXRA also advised the benefits would include saving escalation costs and
assisting delivery of its most difficult and complex package.
Both the Southern package and the North Western package are using a
competitive alliance for the initial sites, with additional sites dependent on
the alliance’s performance.
DTF initially advised government against accelerating the removal of
Skye Road. It considered the acceleration was rushed and warned that it
may increase the cost and complexity of the North Western package. At
DTF’s request, LXRA provided documentation showing the capacity of the
North Western package to undertake the additional work. DTF subsequently
approved the acceleration.
Prior to receipt of this documentation, government decided to proceed and
moved responsibility to the North Western Alliance. In March 2017, LXRA
estimated that this cost an additional $11 million, due to a reduction in
anticipated program efficiencies.
Compared with other crossings in the Southern package, Skye Road is the
easiest to progress as the community supports the reference option in the
business case. While $11 million in additional costs is not material in the context
of the whole LXRP, accelerating its removal by moving responsibility to the
North Western Alliance helps LXRA to meet the government’s committed target
of removing 20 level crossings by 2018.
Inclusion of additional level crossing sites
The pre-determined selection of level crossings affects packaging. As stated
previously, the government added two level crossings to the LXRP, due to their
adjacency to other LXRP works. This indicates that the LXRP could have gained
efficiencies by considering level crossings that are outside the 50 selected.

Figures 3D and 3E present alternative packaging options for the Frankston and
Craigieburn lines.
In the 7.5-kilometre stretch of the Frankston rail line between Edithvale Road
and Station Street, Seaford, there are 10 level crossings. The LXRP will remove
five of these, leaving five in place.
Also on the Frankston line—in the 1.9-kilometre stretch between Neerim Road
and North Road—there are three level crossings. The LXRP has removed
North Road. Glen Huntly Road level crossing is 1.6 kilometres from North Road
and the Neerim Road level crossing is less than 300 metres away. Neither of
these are part of the LXRP.

Alternative packaging options—Frankston line

Distances listed are from the first to last crossing.
VAGO, based on research by Stone and Woodcock.

On the Craigieburn line, LXRA will remove Buckley Street as part of the LXRP.
However, two level crossings in close proximity are not part of the program for
removal. The Park Street level crossing is 550 metres away and Puckle Street is
1.1 kilometres away, as shown in Figure 3E.

Alternative packaging options—Craigieburn line

The distance shown is between the Buckley Street and Puckle Street crossings.
TfV is currently leading the development of the methodology for selecting
further level crossings for removal, so neither LXRA nor TfV could advise us of
whether or how crossings such as those listed above will be incorporated in
future removal packages.
Sequencing
Sequencing refers to the order in which removals occur, both within packages
and across the whole LXRP.
Sequencing of all transport infrastructure projects currently underway—
including the LXRP—needs effective management to ensure expertise and
resources are available, and to minimise the impact on the community.
Sequencing of LXRP works
Meeting the government’s commitment to deliver 20 crossing removals by
mid-2018 is a determining factor in the sequencing of crossing removals.
When planning the delivery of crossing removals, LXRA also considered:
 the large volume of rail projects in Victoria and New South Wales between
2016 and 2025, including MTP, CPLU, Sydney metro expansions and
New South Wales light rail projects
 maintaining flexibility in the procurement and delivery of crossings
 government announcements about the timing of individual crossing
removals
 the extent of preparatory works that were complete for each crossing
 whether the design solution was known, and its complexity.

LXRA did not analyse which crossings had the highest priority for removal, from
a safety or rail efficiency perspective, to inform the sequencing of crossing
removals. LXRA advised that instead, the packaging of works drove sequencing
decisions. This meant that crossings that were already progressed enough to be
put to tender became the initial works within a package and were removed first.
LXRA implemented the sequencing of works through the request for proposal of
each package. This outlined a proposed delivery order and time frame, however,
alliances were able to propose alternative sequencing within the package to
optimise value for money.
Removing level crossings involves the temporary closure of the rail line and its
Rail occupation to enable construction works. Minimising the impact to the
occupations travelling public has been an important consideration for LXRA and alliance
members.
Types of occupations
There have been two types of rail track occupations:
 major works—longer track occupations which result in larger disruptions
and often require alternative transport services for the travelling public
 minor works—short-term use of the track, with less disruption, where
occupations usually happen after the last train has run and before the first
train the following morning, or single weekend day works.
At July 2017, there were 95 major and 257 minor occupations planned, of which
around 51 per cent and 56 per cent respectively have been completed, as
shown in Figure 3F.

Occupations
Minor
143 114 257
occupations
Major
48 47 95
occupations
0 50 100 150 200 250 300

Occupations
Completed occupations Planned occupations


At September 2017, the longest major occupation was 42 days and the longest
planned occupation is 83 days.
Planning for occupations
During the request for proposal stage, alliances are responsible for proposing
the number, type and length of occupations that will best deliver their program
of works. If LXRA deems that the proposed occupation schedule is not
acceptable, it seeks to resolve its concerns with the appointed alliance.
Planning for major occupations commences at least six months before the
proposed occupation. As the rail line operator, MTM is the ultimate approver of
rail occupations. If planning documents do not meet its requirements, or the
occupation is not likely to cease on the agreed day and time, MTM may
postpone or cancel the planned occupation.
At July 2017, the alliances did not complete around 3 per cent—three
occupations—of total major occupations as planned. Two of these delays were
less than one hour, and the third was one day late. The small number of late
completions is a good result, and evidence of sound occupation planning and
management.
Alternative transport provision
The majority of major occupations, and some minor occupations, require
alternative transport, usually through bus replacements.
PTV, LXRA, MTM and VicRoads notify public transport users of planned service
disruptions and bus replacement services well in advance through public
transport websites, social media and notifications at train stations and tram
stops.


Intended benefits
The intended benefits of the LXRP are diverse and include those generally
recognised for transport projects—specifically, improvements to safety and
travel, stimulating economic growth, revitalising local communities, and
facilitating more trains running more often.
As completion of the LXRP is not due until 2022—with only 10 of 52 crossings
Conclusion
removed—there is insufficient data at present to make an informed judgement
on the extent to which it is achieving intended outcomes. Additionally, while
LXRA has developed KPIs and targets, some of these are not meaningful.
Without these, LXRA cannot assess the extent to which the program is achieving
intended outcomes.
DEDJTR has developed a benefits management framework in accordance with
Benefits DTF requirements.
management The framework includes an investment logic map, benefit map and benefit
framework management plan. These were developed from a series of workshops, which
included consideration of the problem and benefits, and knowledge from
previous level crossing removal projects and other related programs.
DEDJTR circulated the investment logic map, benefit map and benefit
management plan to stakeholders from various government departments for
comment.
The following high-level benefits have been identified for the LXRP:
 Improved productivity from more reliable and efficient transport
networks—addressing the congestion and delays caused by level crossings
will improve the efficiency of Melbourne’s transport networks.
 Better connected, liveable and thriving communities—removal of level
crossings will reduce delays and increase the attractiveness of living and
investing in areas surrounding the crossings.
 Safer communities—removing rail and road intersections will eliminate the
conflict points between trains and road users, and trains and pedestrians,
reducing the number of crashes.

DEDJTR developed KPIs and targets to measure the delivery of these benefits.
LXRA is responsible for monitoring the achievement of performance targets and
for actions required to improve any area where the target is not achieved.
LXRP’s benefits framework has limited outcomes reporting—due to the lack of
comprehensive indicators and targets—and needs improvement. The benefits
framework is outlined in Appendix G.
KPIs, targets and reporting
KPIs and targets specified in the benefit management plan are not
comprehensive, in that they only require an ‘improvement’—for example:
 100 per cent of sites with road based public transport will have improved
punctuality
 100 per cent of sites will have improved access to local activity centres and
major services.
These targets would be realised with any level crossing removal.
LXRA advised us that it deliberately set targets in this way because factors other
than the crossing removal can affect outcomes. Given this, the KPIs themselves
are unlikely to be suitable measures.
LXRA should still monitor its performance against intended benefits so that it
can meaningfully report on the contribution the LXRP is making in achieving
outcomes.
The business case indicates that the principal transport benefits from the LXRP
are changes in journey times for private, business and freight vehicles across
Melbourne’s road network.
The business case indicates that LXRA will measure and report for the whole
program, although it will collect some measures and KPIs for individual
packages. For the CTD rail corridor project, LXRA will prepare a benefits
management plan for the entire corridor rather than for individual crossings.
LXRA advised that when the removal program is completed, it intends to
‘roll up’ individual benefits reports into a holistic program report. In doing so,
LXRA will have limited timely insight into how LXRP as a whole is progressing
towards benefits realisation.
LXRA has quantified journey times as travel time savings, included in its CBA as a
core benefit. LXRA should use these and other CBA core quantified benefits as
KPIs, and measure and report on these core transport benefits consistent with
the business case. See Appendix E for the value of core quantifiable benefits.
Progress towards benefit realisation
LXRA prepared draft benefit reports for four sites that show the impact of
crossing removals as at March 2017—Burke Road, Centre Road, McKinnon Road
and North Road. Three sites, excluding McKinnon Road, have seven KPIs with
available data. Data is available for only one KPI for McKinnon Road. None of the
sites have met all seven KPIs.

LXRA acknowledges that the draft benefit reports do not provide meaningful
information about the extent of improvement and whether the progress results
are in line with expectations.
LXRA makes a judgement on KPI data it compiles such as travel times, vehicle
speeds, physical pedestrian counts, cyclists and community surveys. Where the
data indicates benefits are not tracking as expected, LXRA considers whether it
should take corrective action. However, LXRA does not document its assessment
of the data.
Benefit reports would be more meaningful if they included commentary to
interpret the results. For example, if travel time in the morning peak reduced by
1.9 minutes, commentary on whether these results are positive or otherwise
should be included.
Figure 4A provides examples of KPI targets that level crossing removals have
met or not met.

Examples of KPI targets
Target Result
Average travel time  Met for Burke Road, Centre Road and
reduced North Road
 Not met for McKinnon Road
Vehicle throughput  Met for Burke Road, Centre Road and
increased North Road
 Partly met for McKinnon Road
Travel time reliability  Met for Centre Road and North Road
improved  Partly met for Burke Road
 Not met for McKinnon Road
No new safety incidents  No data available
Data is not yet available for a number of KPIs. These include:
 community satisfaction with local amenity following crossing removal
 IDOs
 public transport intermodal connectivity
 reduced number of safety incidents and improved ALCAM risk score.
Overall, the reports for the four crossings indicate that benefits realised to date
are below expectations. Further, without specific targets, it is not known if the
extent of improvement, where achieved, is in line with expected outcomes.


LXRA has developed a comprehensive plan aimed at maximising value-capture
Maximising opportunities through the LXRP.
value-capture Value capture is the act of collecting a portion of the benefits from public
opportunities infrastructure investments that flow to the value of land. Government can then
use that value to pay for a portion of the corresponding infrastructure
investment.
For the LXRP, value capture is limited to IDOs. For example, railway land that
An integrated
becomes surplus to requirements through a grade separation may, with some
development
opportunity (IDO) refers enabling works by LXRA, be suitable for sale to the private sector to develop.
to the value created IDOs can also include broader social benefits such as social housing, community
through infrastructure services and open spaces.
and land development
that occurs when LXRA released an IDO strategy in December 2015. It provides guidance on
removing the level identifying IDOs, potential benefits and how benefits can be realised.
crossing.
Implementing the strategy involves the following key activities:
 establishing an experienced multidisciplinary team to optimise value capture
 developing an appropriate planning approval process focused on project
planning and design, to increase certainty and improve value-capture
opportunities
 identifying entrepreneurial commercial and development opportunities that
are scoped against market appetite for investment and risk taking—the
identification of development opportunities is done using project proposals
and the procurement process, rather than through program-level planning.
Monitoring IDOs
LXRA’s ongoing monitoring of IDO projects is timely and comprehensive. It
produces monthly IDO dashboard reports that provide a high-level
comprehensive summary of the status of each level crossing site against project
milestones. The report includes:
 gross and net revenue forecasts for the state from the sale of developed
land
 costs incurred by the state to facilitate IDOs
 the type and number of residential and commercial properties proposed to
be developed.
At March 2017, LXRA had identified 26 possible IDO sites estimated to provide a
net return to the state of $153 million. This includes $271 million from property
sales less $118 million for development enabling works, such as site preparation
works.


The Coordinator-General has signed the development contract for one site,
24 sites are under consideration and one site is not proceeding. LXRA expects
completion of the first IDO site in March 2021 and the last in September 2027.
While LXRA aims to recover the enabling costs it incurs at each site, it does not
have a specific net revenue return target.
LXRA’s inability to get stakeholders to reach agreement on property
developments is delaying the timely realisation of IDOs, particularly on more
contentious developments, such as high-rise apartments or office towers.
This lack of agreement delays government approval of the development scope
and subsequent property development agreement. This means that despite the
alliance completing the level crossing removal and enabling works for the IDO,
construction cannot start even though LXRA has engaged a developer.
LXRA also acknowledges the estimated return to the state may reduce if there is
significant community opposition to the proposed development or the cost of
enabling works becomes excessive.
Maintenance of open space
Responsibility for maintenance of community open space, such as parklands,
created through an IDO project is yet to be resolved.
Although LXRA meets the cost of developing the land into open space, its
crossing removal budget does not extend to meeting the ongoing maintenance
costs. LXRA has advised that VicTrack—the owner of the railway land—and the
local councils—whose municipality the open space belongs to—have not yet
reached agreement for the ongoing maintenance of the area. VicTrack advised
that it could manage this activity if funding was provided to do so.
In April 2016, LXRA put forward a proposal to government for a $15 million
open space maintenance account created through the CTD project. DPC and DTF
questioned the establishment, management and maintenance of the account.
As at October 2017, the proposal is still under consideration.


Network integration
and integrity
The LXRP is occurring in parallel with a range of other major transport projects
including the MTP, CPLU and HCMT projects.
Integration between the LXRP and other major rail projects is important for
ensuring the efficient and effective development of Melbourne’s future
transport network—now overseen by TfV. PTV also has a major role in ensuring
integration of all rail projects into the network.
PTV does not have adequate resources to effectively perform its network
Conclusion integrity role. This has undesirable cost and scope consequences for the
integration of the LXRP and other concurrent rail projects into the rail network.
PTV, with support from TfV, which is now responsible for transport planning,
will need to ensure that actions to address shortcomings are effective.
One of PTV’s key functions, since September 2016, is to ensure network
Oversight of integrity—a functionally effective, reliable, maintainable, secure, safe and
public transport environmentally compatible public transport network. Among other things,
network integrity this requires PTV to:
 understand the network’s future performance requirements
 establish network requirements and standards
 understand the current condition of rail assets.
This function is particularly important for the effective delivery of the LXRP as
part of a series of other city-changing rail projects. Specifically, PTV and TfV
need to make sure all concurrent rail projects properly integrate with the
existing train network and that their expected project benefits can be realised.
PTV has not performed this role due to a lack of capability, and by not
establishing standards or controlling risks.

Capability gaps
PTV commissioned an independent review in May 2016 (the May 2016 review),
which identified that PTV had insufficient capability to perform its network
integrity function:
‘the network integrity role was not performed to an adequate level
having limited resources, a focus on discrete individual projects rather
than a “whole of network” public transport system perspective and
insufficient governance during delivery.’
The May 2016 review also found a number of capability gaps existed within PTV,
including engineering, technical safety and asset management. The review
noted that if PTV does not address these gaps, network integrity is at significant
risk. PTV would then not be able to demonstrate that it is effectively managing
its portfolio of transport assets and providing long-term value for money.
Absence of contemporary rail standards
As part of its network integrity and assurance role, PTV is responsible for
establishing:
 network technical requirements—high-level technical requirements for a
transport corridor or geographic area
 network technical standards—derived from network technical requirements
and used to inform and direct the development of system requirements and
specifications, and engineering standards that AROs are required to develop.
Neither network technical requirements nor network technical standards have
been established—instead, Victoria operates under the industry-derived
Victorian Rail Industry Operators Group standards.
The May 2016 review also found that no entity has responsibility for reviewing
the Victorian Rail Industry Operators Group standards adopted by the AROs. The
process of updating and challenging standards to achieve a best-for-Victoria
performance standard has not progressed effectively in recent times.
The May 2016 review emphasised that without contemporary standards,
agencies delivering rail projects are proceeding with varying levels of
understanding of network requirements and of their duties to assure projects
meet engineering, network integration and technical safety requirements.
This poses significant risks of the new systems not being integrated into the
current network.
PTV has acknowledged that while it has relied on Victorian Rail Industry
Operators Group standards, a modern public transport network requires a more
robust and formally managed set of technical standards, including the
establishment of appropriately controlled engineering standards.


PTV has initiated action aimed at establishing appropriate engineering
standards, with a view to replacing the Victorian Rail Industry Operators Group
standards with the network technical standards by July 2018.
Application of standards to the LXRP
LXRA set project system requirements that contractors delivering the LXRP are
required to comply with. These project system requirements are a translation of
PTV and MTM requirements, as well as other standards and specifications.
However, during the project system requirements process, there is scope for
variations which, in turn, can have cost implications for projects—for example,
an approval to not comply or partially comply may reduce project costs and
time lines.
MTM, the ARO in the metropolitan area, manages the approval processes for
changes to its engineering standards and their interpretation. This can occur
using either a:
 standard waiver—a mechanism to assess, document and approve any
deviation from current endorsed standards applicable to maintain, upgrade,
renew, build and commission MTM assets
 design practice note—an instruction issued by MTM on how to interpret, or
to clarify a standard or practice, which is then applicable to that standard
for the entire network.
However, PTV agrees that as MTM has limited insight into network‐level
requirements, including future developments, there is a risk that these
decisions can affect other transport projects.
Furthermore, as MTM is also a member of all of the LXRP alliances, there is a
perceived conflict of interest. MTM is both part of the project development
team applying for a standard waiver and part of the organisation making
decisions on variation requests.
LXRA and PTV have both advised that MTM’s standard waiver process mitigates
the risk of the perceived conflict occurring, as the process is managed through a
different part of the organisation than the one that is involved with the project.
The Office of the National Rail Safety Regulator is also an important control.
MTM is accountable to the Office of the National Rail Safety Regulator, requiring
it to conform to correct processes in granting waivers; otherwise, its
accreditation is at risk.
While the Office of the National Rail Safety Regulator would consider processes
for granting standard waivers, it would not necessarily look at the process of
developing design practice notes. To mitigate this and other network integrity
risks, PTV has introduced a number of controls.

Victorian Auditor‐General’s Report Managing the Level Crossing Removal Program 69

Controls for network integrity risks
PTV has established a number of arrangements to improve oversight of and
accountability over how it manages network integrity risks. These include a
network integrity governance framework, as shown in Figure 5A.

Network integrity governance framework

Network Asset Configuration
and Assurance Committee
Network Integrity Network Operations
Working Group Working Group
 Network technical standards  Network performance requirements
 Current network configuration  Network concept of operations
 Client requirement document  Operational modelling governance

VAGO, based on information provided by PTV.
In November 2016, PTV established the Network Asset Configuration and
Assurance Committee to provide:
 integrated advice on network planning and development
 assurance that the capital program is aligned to network technical
requirements and network technical standards
 assurance that the existing network is ready to receive planned investments.
The Network Asset Configuration and Assurance Committee also approves any
proposed changes to network performance requirements.
Two working groups support the Network Asset Configuration and Assurance
Committee:
 The Network Integrity Working Group—established in February 2017,
includes representatives from PTV, MTM, TfV, VicTrack, V/Line and Yarra
Trams. It is accountable for the technical integrity of the public transport
network system and assets, including:
 approving interpretation of network standards
 approving all standard waivers specific to a project
 reviewing risks, assumptions, issues and opportunities that will have an
impact on the integrity of the network, including future proofing.
 The Network Operations Working Group—provides advice on public
transport network capability and performance.


In addition to these internal governance arrangements, PTV also added a
formalised standards governance process in the new franchise agreement with
MTM, beginning on 30 November 2017. This includes the planned
establishment, in January 2018, of a standards governance group comprising
senior representatives from PTV and MTM that will review and approve:
 any proposed changes to network standards
 any proposed new standards
 any processes to be adopted relating to the assessment or acceptance of any
MTM noncompliance with a standard.
PTV’s introduction of these additional controls to improve its network integrity
function is happening in parallel with the delivery of a number of important
transport projects. It is therefore important for PTV, and TfV, to closely monitor
the effectiveness of these new arrangements, particularly for programs such as
the LXRP, which is well underway.
Network development plan
PTV developed a network development plan for metropolitan rail in 2012, which
sets out the future state of the rail network. PTV has not revised this plan.
TfV has indicated that it is developing a rail network development plan to
replace PTV’s 2012 plan. The LXRP business case refers to PTV’s plan.
LXRA’s report to the MTIP board in April 2017 stated that:
‘TfV currently does not have an agreed baseline for the performance
of the metropolitan rail network (e.g. trains per hour, power
requirements), no comprehensive assessment of the condition of rail
assets and no agreed plan for the future state of the network.’
Until TfV develops and approves an updated plan, there is a risk that LXRA may
need to vary or redo works associated with the current crossing removals.
Poor network integrity has already contributed to cost increases for some rail
Cost projects, such as those along the Cranbourne Pakenham rail corridor that
implications of include the HCMT, CTD and the MTP.
poor network In March 2017, PTV predicted that the long lead times of projects in the CPLU
integrity program would necessitate parallel development and delivery to meet key
delivery dates. However, detailed consideration of the appropriate network
requirements, and their subsequent application to the projects currently in
delivery, highlighted some scope gaps and interface management issues that
need to be resolved.
An indicative cost estimate for addressing these issues was $381.3 million—
$158.6 million for additional work required in 2017–18 and a provision to cover
associated risks of $222.7 million.


The successful completion of the CTD project, as well as other major transport
projects, is critical for the successful future operation of the MTP. As PTV
predicted, parallel development and delivery of these projects has been
necessary to meet key delivery dates.
As part of DTF’s HVHR project requirements, a due-diligence review on the
interface and integration risks associated with the MTP and associated
inter-related projects on the Sunbury to Dandenong rail corridor was
commissioned in September 2016.
The review noted that the LXRA, together with the Melbourne Metro Rail
Authority, had developed interface control documents for the CTD and HCMT
projects—including for additional works that LXRA could deliver while
completing grade separations that would be beneficial for the HCMT.
The review also acknowledged that while a number of issues with the
inconsistency of network standards existed, these are dealt with through the
MTM Engineering Standards Committee. LXRA, MTM, PTV and the Melbourne
Metro Rail Authority attend this committee. LXRA has established a process to
evaluate the inconsistencies against current approved project baselines. The
outcomes are reported back to MTM and PTV.
The April 2017 Infrastructure Coordination Committee report also stated that
the absence of an agreed network performance plan is resulting in the
uncoordinated inclusion of additional scope to accommodate some future
requirements, including:
 Camp Road futureproofing of the Somerton rail connection and future
Campbellfield Station
 Kororoit Creek Road power upgrade to 1 300kV
 Aviation Road/Cherry Street upgrade to include two additional tracks on the
Werribee Line.
The April 2017 Infrastructure Coordination Committee report also identified
that the uncoordinated changes to rail standards related to existing LXRA
projects have impacts on scope, cost and time lines.
In response, LXRA has started discussions across the MTIP and with TfV aimed at
developing future rail standards and an interim change management control
arrangement to enable the scope of LXRA projects to be controlled.
Change management process
The LXRP project steering committee, comprising LXRA, PTV, MTM, VicRoads,
VicTrack and TfV, manages information gaps such as network performance,
asset condition and future network requirements.
For example, if PTV requests LXRA undertake additional works to accommodate
possible future changes to the network, PTV needs to justify the request,
including the cost. If the committee considers the request is not justified, it does
not proceed. If the committee cannot reach a decision, it puts the request to
TfV. The steering committee can make decisions on additional works’ ability to
comply with any updated or new standards.

Without additional funding, LXRA is reluctant to approve requests for additional
works.
Now that TfV is responsible for setting the strategic transport direction, it
should capture lessons from the LXRP to provide sector-wide leadership to
transport agencies, so that future network requirements underpin planning for
all future major transport projects.


Appendix A
Audit Act 1994 section 16—
submissions and comments
We have consulted with the DEDJTR, PTV, VicRoads and VicTrack, and we
considered their views when reaching our audit conclusions. As required by
section 16(3) of the Audit Act 1994, we gave a draft copy of this report to those
agencies and asked for their submissions and comments. We also provided a
copy of the report to DPC.
Responsibility for the accuracy, fairness and balance of those comments rests
solely with the agency head.
Responses were received as follows:
DEDJTR ................................................................................................................. 76
PTV ....................................................................................................................... 80
VicRoads .............................................................................................................. 83
VicTrack ................................................................................................................ 84


RESPONSE provided by the Secretary, DEDJTR


RESPONSE provided by the Secretary, DEDJTR—continued






RESPONSE provided by the Acting Chief Executive Officer, PTV


RESPONSE provided by the Acting Chief Executive Officer, PTV—continued


RESPONSE provided by the Acting Chief Executive Officer, PTV—continued


RESPONSE provided by the Chief Executive Officer, VicRoads


RESPONSE provided by the Acting Chief Executive, VicTrack

Appendix B
List of crossings for
removal
Figure B1 provides the list of LXRP level crossing removals.
Figure B1
Level crossings part of the LXRP
1 Burke Road, Glen Iris 27 Camp Road, Campbellfield
2 Centre Road, Bentleigh 28 Buckley Street, Essendon
3 McKinnon Road, McKinnon 29 Glenroy Road, Glenroy
4 North Road, Ormond 30 Bell Street, Coburg
5 Furlong Road, St Albans 31 Moreland Road, Brunswick
6 Main Road, St Albans 32 Kororoit Creek Road, Williamstown North
7 Blackburn Road, Blackburn 33 Abbotts Road, Dandenong South
8 Heatherdale Road, Mitcham 34 Aviation Road, Laverton
9 Chandler Road, Noble Park 35 Ferguson Street, Williamstown
10 Corrigan Road, Noble Park 36 Cherry Street, Werribee
11 Grange Road, Carnegie 37 Werribee Street, Werribee
12 Heatherton Road, Noble Park 38 Eel Race Road, Carrum
13 Koornang Road, Carnegie 39 Seaford Road, Seaford
14 Murrumbeena Road, Murrumbeena 40 Station Street, Carrum
15 Poath Road, Hughesdale 41 Balcombe Road, Mentone
16 Centre Road, Clayton 42 Charman Road, Cheltenham
17 Clayton Road, Clayton 43 Edithvale Road, Edithvale
18 Mountain Highway, Bayswater 44 Station St/Bondi Road, Bonbeach
19 Scoresby Road, Bayswater 45 Manchester Road, Mooroolbark
20 Thompsons Road, Lyndhurst 46 Maroondah Highway, Lilydale
21 Melton Highway, Sydenham 47 Clyde Road, Berwick
22 Grange Road, Alphington 48 Hallam Road, Hallam
23 Lower Plenty Road, Rosanna 49 South Gippsland Highway, Dandenong
24 Bell Street, Preston 50 Toorak Road, Kooyong
25 High Street, Reservoir 51 Park Road, Cheltenham⁽ᵃ⁾
26 Skye Road, Frankston 52 Mascot Avenue/Station Street, Bonbeach⁽ᵃ⁾
(a) Additional level crossings identified for removal.


Appendix C
ALCAM 2008 metropolitan
crossings list
Figure C1 is the ALCAM 2008 list of 50 metropolitan level crossing ranked from
highest to lower risk.
Figure C1
ALCAM 2008 metropolitan crossings rank
1 Main Road, St Albans 26 Heatherton Road, Noble Park

2 Furlong Road, St Albans 27 Charman Road, Cheltenham
3 Bell Street, Coburg 28 Clyde Road, Berwick
4 Clayton Road, Clayton 29 Toorak Road, Kooyong
5 Macaulay Road, Kensington 30 Hallam Road, Hallam
6 Bell Street, Preston 31 Swanpool Avenue, Chelsea
7 Glenroy Road, Glenroy 32 Racecourse Road, Pakenham
8 Grange Road, Carnegie 33 Koornang Road, Carnegie
9 Cherry Street, Werribee 34 Webster Street, Dandenong
10 Union Road, Surrey Hills 35 Tooronga Road, Malvern
11 North Road, Ormond 36 Chandler Road, Noble Park
12 Aviation Road, Laverton 37 Station Street, Bonbeach(a)
13 Blackburn Road, Blackburn 38 Skye Road, Frankston
14 Buckley Street, Essendon 39 Keon Parade, Keon Park
15 Old Geelong Road, Hoppers Crossing 40 Gaffney Street, Coburg North
16 Mc Gregor Road, Pakenham 41 South Gippsland Highway, Dandenong
17 Riversdale Road, Camberwell 42 Maidstone Street, Altona
18 Ferguson Street, Williamstown 43 Scoresby Road, Bayswater
19 Lower Plenty Road, Rosanna 44 Webb Street, Narre Warren
20 Station Street, Fairfield 45 South Road, Brighton
21 Murray Road, Preston 46 Main Street, Pakenham
22 Station Street, Carrum 47 High Street, Glen Iris
23 Centre Road, Clayton 48 Grange Road, Alphington
24 Seaford Road, Seaford 49 Corrigan Road, Noble Park
25 Moreland Road, Brunswick 50 Maroondah Highway, Lilydale
(a) This site is one of the additional two sites and is not included in our analysis.
Springvale Road, Nunawading; Springvale Road, Springvale; Mitcham Road, Mitcham and Kororoit Creek Road, Altona were
removed prior to the LXRP and are not included in this list or in our analysis. Those highlighted in light blue are part of the LXRP.
VAGO.

Appendix D
VicRoads 2013 priority list
Figure D1 is VicRoads’ 2013 priority list of individual metropolitan crossing sites.
Figure D1
VicRoads’ 2013 priority list
VicRoads 2013 high priority VicRoads 2013 medium VicRoads 2013 lower priority

crossings priority crossings crossings
Balcombe Road, Mentone Buckley Street, Essendon Anderson Road, Yarraville
Blackburn Road, Blackburn Edithvale Road, Edithvale Aviation Road, Laverton
Burke Road, Glen Iris Gaffney Street, Pascoe Vale Bear Street, Mordialloc
Centre Road, Bentleigh Glenroy Road, Glenroy Bondi Road, Bonbeach
Centre Road, Clayton Grange Road, Caulfield East Champion Road, Williamstown
Chandler Road, Noble Park Heatherdale Road, Mitcham Chelsea Road, Chelsea
Charman Road, Cheltenham Neerim Road, Caulfield East Corrigan Road, Noble Park
(a)
Cherry Street, Werribee Park Road, Cheltenham Highett Road, Highett
Clayton Road, Clayton Westgarth Street, Northcote Hudsons Road, Spotswood
Glen Huntly Road, Glen Huntly Lincoln Parade, Aspendale
Glenferrie Road, Kooyong Lochiel Avenue, Edithvale
Heatherton Road, Noble Park Maddox Road, Williamstown
Koornang Road, Carnegie McDonald Street, Mordialloc
Madden Grove, Richmond McKinnon Road, McKinnon
Main Road, St Albans Mont Albert Road, Canterbury
Melton Highway, Sydenham Parkers Road, Parkdale
Murrumbeena Road, Puckle Street, Moonee Ponds
Murrumbeena
North Road, Ormond Ramsden Street, Clifton Hill
Poath Road, Hughesdale Seaford Road, Seaford
Union Road, Surrey Hills Station Street, Carrum
Station Street, Fairfield
Station Street, Seaford
Webster Street, Dandenong
Wickham Road, Moorabbin


Figure D1
VicRoads’ 2013 priority list—continued
VicRoads 2013 no priority crossings
Abbott Street, Sandringham Charles Street, Northcote Greens Road, Dandenong South
Abbotts Road, Lyndhurst Childs Road, Epping Greville Street, Prahran
Albert Street, Brunswick Church Street, Brighton Grieve Parade, Altona
Albion Street, Brunswick Civic Parade, Seaholme Hallam South Road, Hallam
Allendale Road, Eltham Clarendon Street, Frankston Hampton Street, Hampton
Alpine Street, Ferntree Gully Clyde Road, Berwick Heyington Avenue, Thomastown
Arden Street, North Melbourne Coolstore Road, Croydon High Street, Glen Iris
Argyle Avenue, Chelsea Cramer Street, Preston High Street, Reservoir
Armstrongs Road, Seaford Dawson Street, Brunswick Hillcrest Road, Frankston
Arthurton Road, Northcote Devon Road, Pascoe Vale Holden Road, Diggers Rest
Ascot Vale, Road Flemington Diamond Street, Eltham Hope Street, Brunswick
Bakers Road, Coburg North Donnybrook Road, Hopkins Road, Rockbank
Donnybrook
Barry Road, Campbellfield Dublin Road, Ringwood East Hutton Street, Thornbury
Bay Street, Brighton Eel Race Road, Carrum Keon Parade, Reservoir
Beavers Road, Thornbury Evans Road, Lyndhurst Kororoit Creek Road, Altona
Bedford Road, Ringwood Exford Road, Melton South Latrobe Street, Cheltenham
Bell Street, Coburg Fawkner Cemetery Leakes Road, Rockbank
Entrance, Hadfield
Bell Street, Preston Ferguson Street, Linacre Road, Hampton
Williamstown
Beveridge Road, Beveridge Ferris Road, Melton South Lower Grange Road, Alphington
Boundary Road, Hadfield Fitzgerald Road, Sunshine Lower Plenty Road, Rosanna
West/Ardeer
Box Forest Road, Hadfield Furlong Road, St Albans Macaulay Road, Kensington
Brunswick Road, Brunswick Gaffney Street, Coburg Macaulay Road, North
Melbourne
Brunt Road, Officer Galvin Road, Werribee Maidstone Street, Altona
Calder Park Drive, Calder Park Giffard Street, Williamstown Maidstone Street, Altona
Camms Road, Cranbourne Glen Eira Road, Ripponlea Main Hurstbridge, Rd Diamond
Creek
Camp Road, Campbellfield Golf Links Road, Baxter Main Street, Pakenham
Cardinia Road, Pakenham Grange Road, Alphington Manchester Road, Mooroolbark

90 Managing the Level Crossing Removal Program Victorian Auditor‐General’s Report

Figure D1
VicRoads’ 2013 priority list—continued
VicRoads 2013 no priority crossings
Maroondah Hwy, Lilydale Park Street, Parkville Station Street (Mascot
Avenue), Bonbeach(a)
Marshall Street, Ivanhoe Paschke Crescent, Lalor Station Street, Lalor
McGregor Road, Pakenham Paynes Road, Rockbank Sth Gippsland Hwy,
Dandenong South
Melba Avenue, Lilydale Pier Street, Altona Summerhill Road, Wollert
Millers Road, Seaholme Poplar Road, Parkville Swanpool Avenue, Chelsea
Moorooduc Hwy, Frankston Progress Street, Dandenong Thompsons Road, Cranbourne
South West
Moreland Road, Brunswick Prospect Hill Road, Toorak Road, Kooyong
Camberwell
Mountain Highway, Bayswater Racecourse Road, Pakenham Tooronga Road, Malvern
Mt Cottrell Road, Melton Railway Avenue, Ferntree Troups Road, Rockbank
South Gully
Mt Derrimut Road, Deer Park Railway Road, Eltham Union Street, Brunswick
Munro Street, Coburg Regent Street, Reservoir Union Street, Windsor
Murray Road, Preston Reynard Street, Coburg Victoria Road, Northcote
New Street, Hampton Riversdale Road, Victoria Street, Brunswick
Camberwell
New Street/Dendy Street, Robinsons Road, Deer Park Warrigal Road, Parkdale
Brighton
Normanby Avenue, Thornbury Robinsons Road, Frankston Watsons Rd, Diggers Rest
Oakover Road, Preston Ruthven Street, Macleod Wattletree Road, Eltham
West
Officer South Road, Officer Scoresby Road, Bayswater Webb Street, Narre
O’Hea Street, Coburg Settlement Road, Werribee Street, Werribee
Thomastown
Old Calder Hwy, Diggers Rest South Road, Brighton Wilson Road, Wattle Glen
Old Geelong Road, Hoppers Station Street, Sunbury Woolton Avenue, Thornbury
Crossing
Overton Road, Seaford Station Street, Aspendale Yarralea Street, Alphington
Park Street, Moonee Ponds Station Street, Beaconsfield
(a) Additional level crossing removals.
Level crossing sites included in the LXRP are highlighted blue.
VAGO, based on data provided by VicRoads’ strategic framework for the prioritisation of metropolitan level
crossings.


Appendix E
Core quantifiable benefits
Figure E1 describes the quantifiable benefits and net present value (NPV),
collectively referred to as the core cost–benefit analysis approach.
Figure E1
Benefits summary
Core quantifiable 2016 NPV $million
benefits Description (7 per cent discount rate)
Travel time Includes changes in the journey times for 1 898
savings private, business and freight vehicles across
Melbourne’s road network.

Vehicle operating Total VOCs include all running costs of the 362
cost (VOC) savings vehicle—depreciation, fuel, repairs and
maintenance.
Road travel The removal of level crossings may have an 546
reliability savings impact on travel time reliability for road users
by eliminated unpredictability of boom gates.
Public transport A reduction in road congestion will improve 899(a)
user benefits travel times and reliability for bus passengers,
as well as potentially causing some rail users to
drive instead, and therefore alleviate crowding
on trains. A number of new train stations will
be built, or existing ones upgraded.
Accident cost The removal of level crossings will eliminate a 134(b)
savings number of dangerous locations from the road
network and may reduce the likelihood of
risk-taking behaviour along these roads.
Resource cost RCCs are the difference between the overall 751
corrections (RCC) social and user-perceived costs of travel. For
savings example, motorists perceive some of the costs
of operating a vehicle, such as fuel, but do not
necessarily perceive other expenses like
depreciation.
Cost of pollution Different transport modes result in different 0.03
production of environmental emissions, such as
air pollution and greenhouse gas emissions,
changes in travel patterns may cause changes
in network-wide emissions.


Figure E1
Benefits summary—continued
Core quantifiable 2016 NPV $million
benefits Description (7 per cent discount rate)
Residual value— Benefits are based on a 50-year evaluation 128
replacement cost period. Beyond this LXRP assets will still
provide services to transport users. The
residual value of the benefits to be derived
from level crossing removals at the end of the
50-year evaluation period has been estimated
as the discounted value of the assets at the end
of the period.
Construction During construction, there will be times -57(c)
disruption cost requiring road and rail line closures. Road
diversions and/or provision of replacement bus
services but this may mean that journey times
are longer. At other times, roads or rail lines
may operate with reduced levels of service.
Wider economic Wider economic benefits are productivity 554(d)
benefits impacts that a standard CBA does not
adequately cover. Analysis of wider economic
impacts attempts to capture the broader
impacts of a project including the effects of
connectivity, land development and business
logistics improvement on productivity and
output.
(a) Public transport user benefits is made up of public transport user benefits ($141 million),
station improvement benefits ($466 million) and interchange improvement benefits
($292 million).
(b) Accident cost savings is made up of direct level crossing relating collision reduction
($145 million) offset by an estimated increase in other road incidents due to higher
vehicle kilometres travelled (-$11 million).
(c) Construction disruption disbenefit comprises disruption to rail passengers ($39 million)
and disruption to road users ($18 million).
(d) The figure in the table includes agglomeration benefits ($420 million), increased labour
supply ($82 million), and imperfectly competitive markets ($52 million).
VAGO from information provided by LXRA.


Appendix F
Contract models
Figure F1 shows the break-up of initial and additional works, for each package.
Figure F1
Contract structure
Initial or additional
Package works Level crossing sites
North Eastern Initial Grange Road, Alphington
Lower Plenty Road, Rosanna
Additional Bell Street, Preston
High Street, Reservoir
North Western Initial Camp Road, Campbellfield
Skye Road, Frankston
Additional Bell Street, Coburg
Buckley Street, Essendon
Glenroy Road, Glenroy
Moreland Road, Brunswick
Western Initial Kororoit Creek Road, Williamstown
Additional Abbotts Road, Dandenong South
Aviation Road, Laverton
Cherry Street, Werribee
Ferguson Street, Williamstown
Werribee Street, Werribee
Southern Initial Seaford Road, Seaford
Eel Race Road, Carrum
Station Street, Carrum
Mascot Avenue, Bonbeach
Additional Balcombe Road, Mentone
Charman Road, Cheltenham
Edithvale Road, Edithvale
Park Road, Cheltenham
Station Street/Bondi Road,
Bonbeach
Additional site packages not yet awarded.


Appendix G
Benefits framework
Figure G1 shows the measures and targets for each of the LRXP’s benefits.
Figure G1
Benefits framework
Measure (KPI) Target
Improved productivity from more reliable and efficient transport networks
Travel time in minutes from 100% of sites will have an improvement in
specified origin to travel time following removal of level
destination during a crossings.
specified time period

through the level crossing
Increased vehicle, 100% of sites will have increased throughput
pedestrian and cyclist of vehicles, cyclists or pedestrians following
throughput per hour in a removal of level crossings.
defined area around the
level crossing
Standard deviation of travel 100% of sites with boom gate closures of
time from specified origin more than 25% of the AM peak will have an
to destination during a improvement to the reliability of travel time
specified time period following removal of level crossings
through the level crossing
Average variability in train 100% of sites will have an elimination of
punctuality directly passenger weighted minutes as a result of
attributable to the level signal faults at the level crossing following
crossing removal of level crossings.
Percentage of line grade Dandenong: 100%, Belgrave: 44%, Lilydale:
separated as a result of the 44%, Hurstbridge: 13%, Pakenham: 55%,
LXRP Cranbourne: 73%, South Morang: 11%,
Upfield: 13%, Craigieburn: 29%, Glen
Waverley: 33%, Sunbury: 38%, Altona Loop:
17%, Williamstown: 25%, Werribee: 27%.
Road based public transport 100% of sites with road based public transport
service punctuality in a will have improved punctuality of road based
defined area around the public transport (i.e. an increase in the
level crossing number of services that are on time) following
removal of level crossings.
Access to labour markets 100% of National Employment Clusters will
for National Employment have improved access to labour markets
Clusters that are following the removal of level crossings.
constrained by the level
crossing

Figure G1
Benefits framework—continued
Measure (KPI) Target
Better connected, liveable and thriving communities
Percentage of community At least 60% of survey respondents at
satisfied with local amenity as a each site are satisfied with the changes
result of the level crossing as a result of the level crossing removal.
removal
IDOs as a result of the level All sites identified with IDOs at the
crossing removal Project Proposal stage will achieve an
increase in residential units and/or
lettable retail/business floor space.
Average time to access 100% of sites will improve access to jobs,
employment from different education, and services.
locations as a result of the level

crossing removal
Access to local activity centres 100% of sites will have improved access
and major services within a to local activity centres and major
specified number of minutes as a services.
result of the level crossing

removal
Distance and travel time between 100% of sites have reduced distance
collection and drop off points in a and/or travel time between collection
defined area around the level and drop off points.
crossing
Safer communities
Number of near miss incidents, 100% of sites have zero crashes and near
fatal and serious injury crashes in miss incidents involving trains as a result
a defined area around the level of the level crossing removal.
crossing
No negative safety outcomes as a result
of the level crossing removal works.
Improved ALCAM risk score at the 100% of sites have an ALCAM risk score
level crossing of zero.


Auditor-General’s reports
tabled during 2017–18

Report title Date tabled
V/Line Passenger Services (2017–18:1) August 2017
Internal Audit Performance (2017–18:2) August 2017
Effectively Planning for Population Growth (2017–18:3) August 2017
Victorian Public Hospital Operating Theatre Efficiency (2017–18:4) October 2017
Auditor-General’s Report on the Annual Financial Report of the State November 2017
of Victoria, 2016–17 (2017–18:5)
Results of 2016–17 Audits: Water Entities (2017–18:6) November 2017
Results of 2016–17 Audits: Public Hospitals (2017–18:7) November 2017
Results of 2016–17 Audits: Local Government (2017–18:8) November 2017
ICT Disaster Recovery Planning (2017–18:9) November 2017

All reports are available for download in PDF and HTML format on our website www.audit.vic.gov.au

Victorian Auditor-General’s Office
Level 31, 35 Collins Street
Melbourne Vic 3000
AUSTRALIA
Phone +61 3 8601 7000
Email enquiries@audit.vic.gov.au

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Managing the Level Crossing Removal Program

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A level crossing removal program managed by VicRoads, Metro Level Crossing

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Package Sites Contractual and pricing model Awarded by

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